Chapter 7: Financial Analysis Flashcards
Liquidity
How well the upcoming liabilities can be covered by more liquid assets of the organization
Long-Term Solvency
How heavily an organization is in debt
Efficiency Ratio (Nonprofit/Financial Analysis)
How quickly an organization can cover its bills and collect its receiveables
Long-Term Solvency
How heavily an organization is in debt
Profitability
How well an organization uses its various resources to generate income
Long-Term Solvency
How heavily an organization is in debt
Revenue Diversification
Is an organization either relying too heavily on a narrow revenue stream (risky), or too diversified (going beyond scope of its mission)?
Liquidity: Current Ratio
(Current assets) / (Current Liabilities)
Long-Term Solvency: Debt-to-Asset Ratio
(Total Liabilities) / (Total Assets)
Long-Term Solvency: Debit-to-Equity Ratio
(Total Liabilities) / (Net Assets)
Efficiency: Asset Turnover Ratio
(Total Unrestricted Revenues) / (Average Total Assets)
* Avg Total Assets = (CY Assets + PY Assets) / 2
Efficiency: Days Receivable Ratio
(Accounts Receivable * 365 days) (Unrestricted Revenue)
Profitability: Profit Margin Ratio
(Unrestricted Revenue - Expenses) / (Unrestricted Revenues)
Profitability: Return on Assets Ratio
(Operating Surplus) / (Total Assets)
Trend Analysis
Enabled by consistent measurement and reporting of financial ratios over time, in order to see areas of changing conditions
