Financial Management for Nonprofit Organizations, 3rd Edition

CHAPTER 7DEVELOPING FINANCIAL REPORTS AND RATIOS: MAKING SENSE OF THE NUMBERS

1. 7.1 INTRODUCTION
2. 7.2 MAJOR DIFFERENCES FROM FOR-PROFIT BUSINESS REPORTS
   1. (a) Financial Results Are No Longer the Primary Focus in Management Reports
   2. (b) Primary Financial Objective Is Target Liquidity, Not Profit or Shareholder Wealth
   3. (c) Fewer External Users, with a Different Accountability Focus
   4. (d) Different Funds and the (Temporarily or Permanently) Restricted Versus Unrestricted Net Asset Distinction
3. 7.3 OBJECTIVES OF FINANCIAL REPORTS
   1. (a) Accurate and Timely Representation of Financial Situation
   2. (b) Mission Attainment Supportive Role
   3. (c) Evidence of Accountability
   4. (d) Tool for Turnaround Management
4. 7.4 REPORTING SYSTEM DESIGN
5. 7.5 MAJOR REPORTS
6. 7.6 INTERNAL REPORTS
   1. (a) Annual
   2. (b) Level 1: Budget Variance Analysis
   3. (c) Level 2: Annual Financial Statements and Ratios
   4. (d) Level 3: Fundraising Management and Evaluation
   5. (e) Level 4: Cash and Liquidity Analysis and Projection
7. 7.7 EXTERNAL REPORTS
   1. (a) Statements of Activities, Financial Position, and Cash Flows
   2. (b) Form 990 and Other Public Reports
8. 7.8 CONCLUSION
9. APPENDIX 7A: EXAMPLE FINANCIAL RATIO CALCULATIONS
10. APPENDIX 7B: ADDITIONAL FINANCIAL RATIOS
11. APPENDIX 7C: CREDIT RATING AGENCIES AND DOE RATIOS

7.1 INTRODUCTION

How are things going with the finances of your organization? Is there enough financial strength to expand or add new programs? Or will there be another cash crisis this year? Financial reports and financial ratios provide ...