# Final to Hsm/260 Essay

Running head: Analyzing Financial Statements Analyzing Financial Statements Shelby Underhill University of Phoenix Table of Contents Title Page………………………………………………………………1 Table of Contents……………………………………………………… 2 Abstract……………………………………………………………….. 3 Calculating Ratios……………………………………………………4-7 Explaining Ratios………………………………………………………8 Calculating Costs……………………………………………………. 9-11 Explaining Budgets…………………………………………………12-13 Explaining Funding…………………………………………………14-16 References…………………………………………………………….. 17 Abstract In any organization you will deal with money, it is part of the game.

Yet knowing how to make sure the organization is making money, losing money or even breaking even can assure that the organization will be around for longer. It usually takes large amounts of money to run an organization, even a small one. Knowing where those funds come from, how to spend them, what you should spend them on, and how to make sure you are making a profit, knowing how to run an organization. Analyzing is the key factor, current ratio, long term ratio, program ratio, expense ratio, general management ratio are all common place in finance. Knowing how to solve for these will help anyone in the long run. .

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Analyzing Financial Statements XYZ Non-Profit Corporation 2003 Current Ratio: Current ratio= Current assets/ Current liabilities Long Term Solvency Ratio: Long Term solvency ratio= total assets/ total liabilities Contribution Ratio: Contribution ratio= largest revenue/ total revenues Program/Expense Ratio: Program/Expense Ratio= total program expense/ total expenses General and Management/Expense Ratio: General and management/expense ratio= Total general and management expenses/ total expenses Revenue/Expense Ratio: Revenue/Expense Ratio= total revenues/ total expenses XYZ Non-Profit Corporation 2004 Current Ratio:

Current ratio= Current assets/ Current liabilities Long Term Solvency Ratio: Long Term solvency ratio= total assets/ total liabilities Contribution Ratio: Contribution ratio= largest revenue/ total revenues Program/Expense Ratio: Program/Expense Ratio= total program expense/ total expenses General and Management/Expense Ratio: General and management/expense ratio= Total general and management expenses/ total expenses Revenue/Expense Ratio: Revenue/Expense Ratio= total revenues/ total expenses XYZ Non-Profit Corporation 2002 Current Ratio: Current ratio= Current assets/ Current liabilities Long Term Solvency Ratio:

Long Term solvency ratio= total assets/ total liabilities Contribution Ratio: Contribution ratio= largest revenue/ total revenues Program/Expense Ratio: Program/Expense Ratio= total program expense/ total expenses General and Management/Expense Ratio: General and management/expense ratio= Total general and management expenses/ total expenses Revenue/Expense Ratio: Revenue/Expense Ratio= total revenues/ total expenses Every ratio is important to an organization they help determine whether or not the organization is making money or losing money. The purpose of the current ratio is to assess a private nonprofit organization’s liquidity.

The purpose of long-term solvency ratio is to assess the ability of a private nonprofit organization to pay annual expenses as they come due. The purpose of contribution ratio is to assess the organizations dependency on its major revenue source. The purpose of the programs/expense ratio is used by donors to make more informed decisions about the monies donated or granted. The purpose of the general and management/expense ratio is to determine the proportion of the organization’s expenses that go toward the administration of the private nonprofit organization. The purpose of the revenue/expense atio is to determine if an organization is breaking even, making money, or losing money. Over the three years that XYZ Non-Profit Corporation has been in business they have improved on the number of clients they see as well as the excess of revenues of expenses. Each year they seemed to keep doing better, the first year they were in the red by 19,943 dollars, which is not bad for a first year. The second year they were in the red by 72,420 dollars which is quite a bit more than the first year but they also helped more clients. Yet their interest on the revenues side was way less than the first year.

By the last year they were in the black by 219,112 dollars and they almost served more clients than the first and second year combined. If XYZ Non-Profit Corporation keeps going like they did in 2004 they should be a very successful Corporation. XYZ Non-Profit Corporation 2003 Fixed Costs: (A) Rent: 150,000. 00 Telephone: 24,000. 00 Other: 79,888. 00 Other Man. + 371,101. 00 624,989. 00 Variable Costs: (B) Total / total clients Payroll: 520,069. 00 Supplies: + 171,622. 77 691,691. 77 / 6821 = 101. 41 PX=A+BX P=TOTAL REVENUE/TOTAL CLIENTS P=1,244,261. 00/6821=182. 42 182. 42X=624,989+101. 1X 182. 42X-101. 41X=624,989 81. 01X=624,989 X=7715 XYZ Non-Profit Corporation 2004 Fixed Costs: (A) Rent: 150,000. 00 Telephone: 24,000. 00 Other: 115,999. 00 Other Man. +445,819. 00 735,818. 00 Variable Costs: (B) Total/ total clients Payroll: 915,787. 20 Supplies: +320,525. 52 1,236,312. 72/11822= 104. 58 PX=A+BX P= TOTAL REVENUES/TOTAL CLIENTS 2,191,243. 00/11822= 185. 35 185. 35X=735,818. 00+104. 58X 185. 35X-104. 58X=735,818. 00 80. 77X=735,818. 00 X=9110 XYZ Non-Profit Corporation: 2002 Fixed costs: (A) Rent: 150,000. 00 Telephone: 24,000. 00 Other: 117,903. 00

Other Man: + 351,000. 00 642,903. 00 Variable Costs: (B) Total/ total clients Payroll: 417,004. 00 Supplies: + 125,101. 20 542,105. 20/ 5962= 90. 93 PX=A+BX A=642903 B=90. 93 P=TOTAL REVENUES DIVIDED BY TOTAL CUSTOMERS. P= 1,165,065. 00/5962= 195. 42 195. 42X=642903+ 90. 93X 104. 49X=642903 X=6153 Line item budgets can be used to help any organization organize their spending and their incomes. Line item budgeting system is the most frequently used budgeting system in human service organizations and programs. The purpose of line item budgeting is financial control this is an administrative tool to control spending.

This is the basic organizations financial plan for the fiscal year. This allows the program managers and other staff to determine the amount of resources that will be allowed to various programs during the fiscal year. There are two categories in the line item budgeting revenues and expenses. One of the biggest disadvantages of line item budgeting is trying to get the unbalanced budget balanced. Since usually an organization wants to help more clients than they have money for this causes a rift in the organization as a whole. Since a line item budget is so simple many organizations chose to use this form of budgeting.

Yet once you get unbalanced it is hard to overcome. Performance budgeting is a system that relates expenses to programs by determining the programs output performance, the total program cost, and the cost per output. This budgeting system can only be accomplished at the program level, unlike line item budgeting. Some of the best things about performance budgeting is that it provides information to administration on how much the outputs of the organization will cost. Performance budgeting also focuses on the mission, objectives, and the goals of the organization.

These are very important when dealing with individual programs instead of the whole organization. The main disadvantage of performance budgeting is since it is at the program level it is harder to compute. Not every employee can actually compute the amounts that are needed to run the program smoothly. Each program has their own budget, and each budget has to be separate from the other programs, and computing all of this can become stressful. Program budgeting system is to relate the organizations expenses to programs, measures the program outcomes, and the cost to the program of achieving the outcomes.

In order for this to compute most organizations take the totals cost for the fiscal year and then divide it by all of the programs that need funding. This gives the organization to cost per outcome. Some of the advantages to program budgeting are: provide information on the amount of outcomes achieved by the organization’s program and the attendant costs. This also allows them to raise the level of debate from service and efficiency concerns to clients and effectiveness concerns. A major disadvantage of program budgeting is that good outcome performance measures are usually hard to develop.

Many organizations programs still do not have generally accepted outcome measures because no agreement exists between the stakeholders. Since the organization takes the entire cost for the fiscal year and divides the programs that need to be covered by that amount if one program needs more money to run it, it cannot happen, because each program shares the same amount of money. Funding is the key to any organization, because without money you cannot run any organization. The traditional ways in which to get funding are through grants; they can either be public grants or private grants.

Public grants are more abundant, but they have tighter rules and regulations in order to receive them. While private grants can help smaller organizations they usually only want to help those organizations that have the same ideas as them, the rules and regulations to get a private grant are more relaxed. The two grants that would be great for XYZ Non-Profit Corporation are as follows. 1. 3/16/2009 Rehabilitation long term training, Rehabilitation Counseling Ed-Grants 022309-002 Estimated Total Program Funding: 3,450. 00 Award Ceiling: 150,000 Cost Sharing and Matching Required: Yes Eligible Applicants

County Governments Non Profit 501 (c) (3) Agency Name: Department of Education http://www. grants. gov/search/search. do;jsessionid=CCXvLSLPq8v7np8y6JP1fDj9J9rRw7VNfxTRGhSlnbMMXpHR66Kv! -1821001113? oppId=45435&mode=VIEW 2. 2. Clinical Research on Mental Illnesses in Older Adults PA-07-163 Estimated Total Funding: Open Award Ceiling: Open Cost Sharing and Matching Required: No Eligible Applicants Non Profit 501 (c) (3) Agency Name National Institutes of Health http://www. grants. gov/search/search. do;jsessionid=CCXvLSLPq8v7np8y6JP1fDj9J9rRw7VNfxTRGhSlnbMMXpHR66Kv! -1821001113? oppId=43824&mode=VIEW

Either of these grants would be perfect for XYZ, seeing how they both work with helping those that need help the most. Since XYZ needs funding from grantors that deal with either the mentally impaired or those that need counseling for other issues these are the perfect two. Two nontraditional funding options are either fundraisers or to have a raffle. Either idea is a great way to raise money quickly to cover emergency expenses. Fundraisers are considered the most popular nontraditional way to raise money. When an organization needs to raise emergency funds they usually set up either one large fundraiser, or several small fundraisers.

When hosting a fundraiser there are several ways you can raise money. The first way is to offer services, food, or crafts for a discounted price to the community with all proceeds going to the organization. The other fundraiser would be community wide, depending on the season Spring Folly. Vendors would be invited to take part in this fundraiser that would be usually in the center of the community. The vendors would consist of any person or business that wanted to set up a booth to either sale their wares, or sell food, or even have crafts available for the children to take part in.

The organization would sell spots for the vendors to set up on, depending on the vendor and what they are selling depends on how much of their profit would go to the organization. (Anywhere from 25% to 50% could go back to the organization hosting the fundraiser. ) The second type of nontraditional funding is having a raffle. In order to have a raffle the organization that needs to raise the money, must ask local business to either donate for free, or at little cost items to be raffled off. Once the organization has collected what they think is a good number of items a price is set for each ticket.

The money raised from selling tickets goes directly to the organization depending on the gifts being raffled depends on the amount of tickets that are sold, the bigger the item the more tickets are sold. The organization sets up an opening and closing time in which all tickets must be purchased. This is a popular way to raise money as long as you can get items of value to raffle. The XYZ Non-Profit Corporation as of 2004 has made it to the “black”, which means they are doing a wonderful job of helping El Paso County residents.

They are providing services to each and every resident that meets their guidelines. XYZ Non-Profit Corporation can continue to help more clients every year and still have a profit. XYZ Non-Profit Corporation is not only helping the residents that need help, but they are helping the entire El Paso, Texas community. Since the XYZ Non-Profit Corporation is trying to get counseling for those in need, it helps the entire community feel safer knowing those that need the help the most are getting it. References Grants. Gov (2010) http://www. grants. gov/ Retrieved May 5, 2010.

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