Not-for-Profit Entity (NFP)

Question 1

NFP Statement of Activities - How are expenses reported?

Answer 1

Expenses are reported as decreases in net assets without donor restricitons.

Question 2

Statement of functional expense

Answer 2

Supporting activities generally include fundraising costs, administrative services, and membership development expenses. The statement of functional expenses, which is prepared by voluntary health and welfare organizations, is a two-dimensional report which reports only expenses classifying them into functional categories of program expenses and support service expenses. Program expenses are services that relate directly to the organization’s mission. Support service expenses are expenses related to management and general activities of the organization, its fundraising activities and membership development activities.

Question 3

Ongoing Central Transactions

Answer 3

Revenue from charity care is excluded $25,000 and provisions for bad debts is not considered while calculating net patient revenue.

Question 4

NFP Year End Financial Reports

Answer 4

Requires statement of cash flow

Question 5

Working Capital Cycle

Answer 5

Current Assets – Current Liabilities
[(Average Working Capital x 365)/Sales Revenue]

Question 6

Degree of Financial Leverage

Answer 6

EBIT / (EBIT – Interest)

Question 7

Average Accounts Receivables

Answer 7

⇒ Accounts Receivable Turnover Ratio = Credit Sales / Average Accounts Receivables
⇒ Accounts Receivable Turnover Ratio = $1,956,300 / $384,675
⇒ Accounts Receivable Turnover Ratio = 5.09 times

Question 8

Return on Equity = Net Income / Average total equity

Answer 8

⇒ Return on Equity = Net Income / Average total equity
⇒ Return on Equity = 59,325 / [(5256600 + 5565700)/2]
⇒ Return on Equity = 59,325 / 5,411,150
⇒ Return on Equity = 1.1%

Question 9

Pledges

Answer 9

Pledges are recorded in the period they are made, net of an allowance for uncollectible accounts

Question 10

Restricted Net Assets

Answer 10

Gifts with clear purposes (restrictions for how they can be used), the earnings on investments and the principal investment are restricted.

Question 11

Other Revenues

Answer 11

healthcare entity is the usual day-to-day revenue not derived from patient care and services. It includes (1) proceeds from cafeteria meals sold, (2) revenue from educational programs, and (3) revenue from miscellaneous sources, such as from gift shops and parking lots