Financial Statement Ratios And What To Watch Out For In Fina
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From “Financial Statement Ratios” located on the Moodle:

Liquidity Ratios

Current ratio –Current Assets/Current Liabilities

Like cash ratio, below, gives us a sense of how the organization can meet current financial obligations.

Quick ratio –Cash + Marketable securities + Net Accounts Receivable/Current Liabilities

Similar to Current ratio and cash ratio, but narrows scope of current ratio and is slightly wider than cash ratio.

Cash Ratio –Cash + Marketable Securities/Current Liabilities

Ability to cover current liabilities with cash and cash equivalents

Cash Reserve Ratio– Cash and cash equivalents/Total Annual Expenses

It tells us, in a fraction of a year, how long the organization could exist if revenues completely ceased.

Asset Ratio –Current Assets/Total Assets

Gives an idea of how liquid the assets are.

Funding Ratios

Debt to Assets Ratio (aka Debt ratio) – Total Liabilities/Total Assets

Indicates the degree to which assets are funded with borrowed money.

Contribution Ratio(usually does not apply to libraries) – Total contributed revenue/total revenue

Shows the dependence on donated revenue. A ratio over .65 (i.e. 65%) indicates risk because of the high dependence on donors and inevitable “donor fatigue.")

Operating Ratios

Program Expense Ratio — Program Expenses/Total Expenses

This and following Support Service Expense ratio determines how much of our expenditures are related to programs and how much to general management and fundraising.

Support service expense ratio — Support service expenses/Total expenses

See note above for Program Expense Ratio.
Other analyses include:
1. Working capital — the excess of current assets over current liabilities
2. Net surplus – Total revenues – total expenses.
3. Comparing various elements of the financial statements over time (e.g. Changes in revenue sources or specific expense accounts such as utilities)

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