Final Project: Analyzing Financial Statements

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Week Nine Final Project: Analyzing Financial Statements
HSM 260

Current Ratio
Table [ 1 ] | | 2002 | 2003 | 2004 | Current Ratio | Current Assets | $104,296.00 | 0.75 | $82,058.00 | 0.87 | $302,902.00 | 0.43 | | Current Liabilities | $139,017.00 | | $93,975.00 | | $699,004.00 | |

An organization’s current ratio shows how liquid the assets of the agency are by comparison to the short term debts that the agency must pay to continue its operations. This ratio is calculated by taking the assets that can be converted to cash within a year (current assets) and dividing it by the liabilities that are either currently due or will become due within a year (current liabilities). The current ratio, ideally, should be at
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The National Charities Information Bureau (NCIB) set a minimum of 60 percent (0.6) that a non-profit organization should have for this ratio. The goal of this number is to ensure that the organization is spending an appropriate amount of funding on the programs which are the focus of the organization instead of having high amounts of funding going to expenses that are for administration, fundraising, or other expenses or activities that are not related to providing programs and services to serve clients. The XYZ Non-Profit Corporation exceeds the standard set by the NCIB by having a program/expense ratio of 0.70 in 2002. This number continues to improve with 0.72, or 72 percent of expenses being program expenses in 2003; and 0.77, or 77 percent of expenses being program expenses in 2004 (see Table 4). By looking at the increase in this number each year, it can be inferred that the organization is reducing the overhead and other expenses to find more efficient ways to provide programs and services