Fee Setting Assignment Hsm 260 Week 4

ANALYZING FINACIAL STATEMENTS 2 Analyzing Financial Statements FINANCIAL ANALYSIS RATIOS TABLE 2002 2003 2004 Current Ratio 104,296.00/139,017.00 = . 75 82,058.00/93,975.00 = .87 302,902.00/337,033.00 = . 90 Long-Term Solvency Ratio 391,270.00/310,246.00 = 1.26 359863.00/259979.00 = 1.39 699004.00/338937.00 = 2.06 Contribution Ratio 617,169.00/1,165,065.00 = .53 632889.00/1244261.00 = . 51 1078837/2191243.00 = .49 General and Management/Expense Ratio 351, 000.00/1,185,008.20 = .30 371,101/1,316,681 = .28 445,819.00/1,972,131 = .23 Programs/Expense Ratio 834,008/1,185,008 = .70 865,691.77/1,316,681 = . 66 1,410,312.72/1,972,131.72 = .72 Revenue/Expense Ratio 1,165,065.00/1,185,008.00 = .98 1244261.00/131681 = . 94 2191243.00/1972131 = 1.11 Accounting can be confusing and sometimes time consuming, but it is essential in managing the financial matters of a non-profit human service agency. Financial analysis can be defined as the process of using the information provided by financial statements to calculate financial ratios that assess the financial condition of human service agencies (Hertzlinger & Rittenhouse, 1994:133) (Martin, 2001, p. 55). In non-profit human services there are seven basic financial ratios analysis types; (1) the current ratio, (2) the long-term solvency ratio, (3) the contribution ratio, (4) the programs/expense ratio, (5) the general and management/expense ratio, (6) the general and management/expense ratio, and (7) the revenue/expense ratio (Martin, 2001, p. 55). The purpose of the current ratio is to assess private nonprofit human service agencies liquidity. Liquidity of assets means the extent to which an agency has cash or other assets that can be converted into cash quickly that can cover current operating expenses (Martin, 2001, p. 56). An agency wants to be at a least 1.0 in general, anything under this interpretation the agency is facing problems with the liquidity of their assets. When referring to the long-term solvency ratio; it is assessing the long-range financial solvency of a non-profit human service agency’s

Unformatted text preview: The cash basis form of accounting documents the income only when the service is paid for. The importance of the statement of cash flow is very important in the financial management of an organization. This statement provides a breakdown of all the transactions in and out of the organization. The information documented is counted over a specific period of time. The statement of cash flow also makes aware any variations in transactions of the organization. An organizations financial stability relies on the money that is gained and spent daily. If they had no knowledge of how money is spent the organization can go bankrupt. It also provides solid documentation of where the money is spent. Reference Martin, L. (2001). Financial management for human service administrators. Boston, MA: Allyn and Bacon. The Importance of Cash Management (n.d.). The introduction to financial management . Retrieved May 26, 2009, from http://jpkc.szpt.edu.cn/english/supplement/cash %20managment3.htm...
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