HSM 260 Week 9
According to Martin,2001 In terms of interpretation, the current ratio should be at least 1.0, but in general the higher the ratio the better. If the current ratio is less than 1.0, the human service agency may be facing liquidity problems. According to the financial statements of the XYZ Non-profit Corporation, for year 2003 and 2004 Current Ratio is below the average amount available liquidity. This means there is nothing for the organization to liquefy. In reference to Long-term solvency ratio, according to Martin 2001 if the long-term solvency ratio of a human service agency is significantly less than 1.0, the financial viability of the organization may be in question. In year 2003 of the XYZ Non-profit Corporation, there should be no problems as to how payments will be made, but in year 2004, the Corporation is well under budget, which means, there might be problems. If my calculations in the case of Contribution ratios are correct, in year 2003 and 2004, the organization should be in great standing as both years generate revenue over .5. According to calculations of the XYZ Corporation, the Program Expense Ratio finding is that it meets its standards. When calculating financial ratios for a human service agency they are used in order to see the financial condition of the organization. As our text, states there are seven main ratios that are needed for human service agency: the current ratio, long-term solvency ratio, contribution ratio, programs /expense ratio, general and management/expense ratio, fund raising/expense ratio, and the revenue /expense ratio. The current expense ratio is and this formula is used to find out the liquidity of the organization.