Hsm/260 Financial Analysis
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 1.0 …show more content…
because, that would mean that the agency is fully able to cover its current operating expenses (Martin, 2001).
In the case of the XYZ Non-Profit corporation, Table 1 (shown above) shows that the balance sheet calculations indicate that the current ratio went from 0.75 in 2002, to 0.87 in 2003, to 0.43 in 2004. This indicates an improvement in the ratio in 2003 but, a drastic decline in liquidity in 2004. The 0.43 liquidity ratio indicates the company only has 43% of the liquid assets that it actually needs to pay its current obligations. This would leave 57% of the agency’s current obligations that would be late, go into collections, or become unpaid debts. This can be trouble for the agency because it may not be able to stay in operation if it cannot cover current utility, supply, payroll, or other urgent expenses as they arise. Although the current ratio of the XYZ company is not as strong as it should be, this ratio can be interpreted in conjunction with the long-term solvency ratio (discussed in the next section) in order to get a clearer picture of the company’s ability to pay its debts.
Long-Term Solvency Ratio
Table [ 2 ] | | 2002 | 2003 | 2004 | Long-Term Solvency Ratio | Total Assets | $391,270.00 | 1.26 | $359,863.00 | 1.38 | $699,004.00 | 2.06 | | Total Liabilities | $310,246.00 | | $259,979.00 | | $338,937.00 | |
Like the current ratio, the long-term solvency ratio tells the agency’s ability to pay debts. The difference between the two ratios is that while the current ratio looks at the agency’s ability to pay short-term obligations, the long-term solvency ratio shows the agency’s ability to pay the debts that are coming due on an annual basis. This ratio is calculated by taking the long-term and short-term assets of an organization and dividing them by the long-term and short-term liabilities of that organization. Another similarity that the long-term solvency ratio has with the current ratio is that it should be at 1.0 (Martin, 2001). If the ratio is at 1.0 then it has 100% of the assets it needs to cover its debts. XYZ Company’s long-term solvency ratios (shown in Table 2) for 2002-2004 show improvement year after year. The ratio went from 1.26 in 2002 to 1.38 in 2003 (a 0.12 improvement) and from 1.38 in 2003 to 2.06 in 2004 (a 0.68 improvement).
The long-term solvency ratio of the organization should also be considered with the current ratio. The XYZ Non-Profit Corporation current ratio shows the agency is not as financially stable with its short-term liabilities and obligations. The strength of the financial status of the company in the long term solvency ratios shows that the agency has the availability of long-term assets and long-term investments. If the agency needed to it could potentially sell assets or convert long term investments to cash early, if need be, in order to meet current obligations.
Contribution Ratio
Table [ 3 ] | | 2002 | 2003 | 2004 | Contribution Ratio | Largest Revenue Source | $617,169.00 | 0.53 | $632,889.00 | 0.51 | $1,078,837.00 | 0.49 | | Total Revenues | $1,165,065.00 | | $1,244,261.00 | | $2,191,243.00 | |
The contribution ratio is calculated by taking the agencies largest revenue source and dividing that by the total revenues. This calculation shows how dependent the agency is on its biggest source of revenue. In a human services agency this figure is important because many of the sources of income are not guaranteed such as donations, grants, or contracts. Because they are not guaranteed if one of the sources of revenue were to decrease or end then it could have a major derogatory effect on the overall financial status of the agency. It is ideal that this number is as low as possible because, the lower the contribution ratio is, the more diversified the sources of revenue are. If the biggest source of income ends and the contribution ratio is low, then the agency has a greater chance of maintaining financial strength and continuing operations. Ideally, this number should be 0.5 or lower.
The contribution ratio of XYZ Non-Profit Corporation for the years 2002 through 2004 are shown in Table 3. In all three years the largest revenue source for the XYZ Non-Profit Corporation was grant income. Grant income may be subject to federal, state, or local government budget funding availability; it also may be subject to deadlines or eligibility criteria which may change from year to year. In 2002 and 2003 the ratio was above 0.5 figures that it should be below, however in both 2003 and 2004 the number decreased. By 2004, the ratio was at 0.49 and if the decreasing trend continues over time then it will give the agency more financial flexibility in the event that the grants become unavailable in the future.
Program/Expense Ratio
Table [ 4 ] | | 2002 | 2003 | 2004 | Program/Expense Ratio | Total Program Expenses | $834,008.20 | 0.70 | $945,580.00 | 0.72 | $1,526,312.00 | 0.77 | | Total Expenses | $1,185,008.00 | | $1,316,681.00 | | $1,972,131.00 | |
According to Martin (2001) the program/expense ratio is an industry standard “about private nonprofit organizations that can be used by donors to make more informed decisions.” The ratio is calculated by dividing the total program expenses by the total expenses to determine what percentage of total expenses the agency has are program expenses. 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 to clients. This also is proof that the corporation is continuing to exceed the standard set by the NCIB.
General and Management/Expense Ratio
Table [ 5 ] | | 2002 | 2003 | 2004 | General & Management/ Expense Ratio | Total Gen. & Mgmt. Expenses | $351,000.00 | 0.30 | $371,101.00 | 0.28 | $445,819.00 | 0.23 | | Total Expenses | $1,185,008.00 | | $1,316,681.00 | | $1,972,131.00 | |
The general and management expense ratio is essentially an opposite of the program/expense ratio in that it tells how much of an organization’s expenses are related to non-program related expenses. This calculation is completed by dividing the total general and management expenses by the total expenses to determine the percentage of the budget that is being spent on administrative and other costs. These expenses are an indication of how much of the expense money is not able to go to programs or other services that would be related to serving the clients of the organization. It is recommended that an agency that has a ratio of 0.35 or higher should evaluate how they could go about reducing these costs.
Table 5 shows the General & Management/Expense ratio for XYZ Non-Profit Corporation for the 2002, 2003, and 2004 fiscal years. For all three years the ratio has been computed to show that the agency has met the industry recommendation of being at or below 0.35. In addition the number is decreasing each year. Similar to how the increase in the Program/Expense ratio this is another ratio that tells that the organization is finding ways to reduce administrative expenses and find more efficiently serve its clients.
Fundraising Expenses Ratio
Table [ 6 ] | | 2002 | 2003 | 2004 | Fundraising/Expenses Ratio | Total Fundraising Expenses | $117,903.00 | 0.10 | $79,888.00 | 0.06 | $115,999.00 | 0.06 | | Total Expenses | $1,185,008.00 | | $1,316,681.00 | | $1,972,131.00 | |
The fundraising expenses ratio is another important tool in gauging the efficacy of the fundraising activities of a private non-profit organization or agency. The goal is for the fundraising expenses to generate funds at the lowest possible cost. Because each dollar of fundraising expense is one less dollar that is available for program activities, it is recommended that agencies keep this ratio at 0.15 or less. This means that no more than 15 percent of the total expenses of the agency should be used for fundraising activities. The XYZ Non-profit Corporation meets this guideline in each of the three years that the calculation was performed for (2002, 2003, and 2004).
The fundraising expenses ratio calculations shown in Table 6 indicate that the XYZ Non-Profit Corporation had 10 percent of their expenses dedicated to fundraising in 2002, and that the number decreased to just 6 percent in both 2003 and 2004, respectively. This indicates that the agency has improved by minimizing fundraising expenses from 2002 to 2003. The corporation remained stable in 2004 by keeping the fundraising expenses at less than half of the recommendation of .15 percent, thereby allowing more money to go toward programs to serve the clients of the agency.
Revenue Expenses Ratio
Table [ 7 ] | | 2002 | 2003 | 2004 | Revenue Expenses Ratio | Total Revenues | $1,165,065.00 | 0.98 | $1,244,261.00 | 0.94 | $2,191,243.00 | 1.11 | | Total Expenses | $1,185,008.00 | | $1,316,681.00 | | $1,972,131.00 | |
Another important ratio used by private non-profit organizations is the revenue expenses ratio, which is the total revenues divided by the agency’s total expenses.
This number is interpreted to tell how much of a profit a non-profit agency has. In spite of the fact that non-profits do not exist to make money, they also must be careful not to lose so much money that they are unable to continue to provide programs and services. There is no maximum number that a human services agency should not exceed and some excess funds are even recommended to be set aside for financing replacements for worn or malfunctioning assets used for the programs, expansion activities, or unforeseen emergency expenses. This calculation should be at a minimum of 1.0 for the organization to not lose any money. If the number is higher it should not be too much higher, because the higher this number is shows that there are excess funds available that could have been used for programs and …show more content…
services.
The Revenue expenses ratio for the XYZ Non-Profit Corporation fluctuated from 2002-2004 with a low of 0.94 in 2003 and a high of 1.11 in 2004. This reflects that XYZ has had some losses in 2002 and 2003; but by 2004 it created some additional revenues to provide for funding to protect the organization against past/future losses and to fund additional expenses that may arise that will enable the agency to continue to operate.
The line item budget is one of the three most important budgeting systems that is used in human service programs and agencies it provides the management of the agency or organization a way to oversee how or to control the way in which the funds are being spent it is typically divided into several sections expenses and revenues. The purpose is to ensure that the human service agency or organization has set itself up with an approved and workable budget to operate from each fiscal year (Martin, 2001). Because a line-item budget is simple to complete or understand it makes following how staff should utilize funds, if the budget is in balance, or the origin and total of the agency revenues, however the drawback to this type of budget is that it does not allow for the agency to determine the amount of service it provides, the accomplished outcomes, or the cost of service to each client served leaving the agency or organization with no concrete way to determine if they are successful of have failed in their efforts (Martin, 2001) . The program budget helps an agency or organization place its focus on the actual expenses to programs and determine the success or failure based upon the total outcome. There are pros associated with this type of budgeting system in that it offers a clearer picture as to the whether the services being offered are achieving their desired goal or falling short. This better will allow human service organizations or agencies to increase or decrease funding within areas that will better enable them to have a more positive impact on those they provide services it also helps the agency or organization to better know when or where they need to control their cost or compare their current cost with respect to client outcome with other agencies that offer or provide like services (Martin, 2001). Holding an annual special event or fund raiser would be an excellent way to raise money for the XYZ Corporation.
People from the community and surrounding areas could welcome the chance to pull together and host a Christmas feast and auction. Dinners could be purchased at a nominal fee for individuals and families. Businesses from the area could be encouraged to join in and support the cause by donating items to auction after dinner and then we could hold a Christmas dance. Getting a local news personality to come in as auctioneer would definitely buy the event some mention on our local stations resulting in advertising the event. Because the XYZ Corporation has been meeting the needs of the medically indigent for three years now are we are recognized as a 501(c) (3) nonprofit organization we could hold a joint fund raising activity with one of our affiliates such as United Way of America (Martin, 2001). By conducting our annual donor renewal campaign through our volunteers efforts our attempt would be to reach as many of our existing donors either through our mailing list, friends, program members, local business, or by telephone solicitations who may which to make contributions and are in need of reducing their taxable income (Martin, 2001) .
Conclusion
The break-even point of an agency shows how many clients the agency will need in order to meet its costs. Once the break-even point is met then any additional clients would provide profit for the organization. The
breakeven points for the agency outlined in Table 8 (below) reflect the figures in the revenue expense ratio (See Table 7, page 7) to show how the organization did not break even in 2002 or 2003 but had a profit in 2004. | 2002 | 2003 | 2004 | Fixed Cost: Rent & Utilities + Telephone + Management and other | $525,000.00 | $545,101.00 | $619,819.00 | Variable Cost: Payroll + Benefits + Supplies + Other | $660,008.00 | $771,580.00 | $1,352,312.00 | Actual Customers | 5,962 | 6,821 | 11,822 | Break Even Point (BEP)= (Total fixed cost)/((Revenue/customer)-((Variable Cost)/customer)) | 6,197 | 7,866 | 8,734 |
The current ratio is not as strong as it should be however, the long-term solvency ratio tells that the organization does have assets available to cover debts even if they may not be immediately available as cash. The contribution ratio is very closes to the maximum it is recommended to be but decreasing. The program/expense ratio fluctuates between 0.70 and 0.77 over the years 2002-2004 which is a very reasonable number given the fact that it exceeds the industry standards. The general/management expense ratio and the fundraising ratio both improved by decreasing in each year reviewed while the revenue expenses ratio improved by increasing each year.
All in all, the current and future financial future of XYZ Corporation look good. For the most part the organization is doing a good job financially with the ratios being where they should be; which shows that they are making financially sound decisions with managing the budget of the organization. I would anticipate that the organization will be able to serve its clients for years to come.
REFERENCES
Martin, L. (2001). Financial management for human service administrators (1st ed.). Needham Heights, MA: Allyn & Bacon.
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 1.0 …show more content…
because, that would mean that the agency is fully able to cover its current operating expenses (Martin, 2001).
In the case of the XYZ Non-Profit corporation, Table 1 (shown above) shows that the balance sheet calculations indicate that the current ratio went from 0.75 in 2002, to 0.87 in 2003, to 0.43 in 2004. This indicates an improvement in the ratio in 2003 but, a drastic decline in liquidity in 2004. The 0.43 liquidity ratio indicates the company only has 43% of the liquid assets that it actually needs to pay its current obligations. This would leave 57% of the agency’s current obligations that would be late, go into collections, or become unpaid debts. This can be trouble for the agency because it may not be able to stay in operation if it cannot cover current utility, supply, payroll, or other urgent expenses as they arise. Although the current ratio of the XYZ company is not as strong as it should be, this ratio can be interpreted in conjunction with the long-term solvency ratio (discussed in the next section) in order to get a clearer picture of the company’s ability to pay its debts.
Long-Term Solvency Ratio
Table [ 2 ] | | 2002 | 2003 | 2004 | Long-Term Solvency Ratio | Total Assets | $391,270.00 | 1.26 | $359,863.00 | 1.38 | $699,004.00 | 2.06 | | Total Liabilities | $310,246.00 | | $259,979.00 | | $338,937.00 | |
Like the current ratio, the long-term solvency ratio tells the agency’s ability to pay debts. The difference between the two ratios is that while the current ratio looks at the agency’s ability to pay short-term obligations, the long-term solvency ratio shows the agency’s ability to pay the debts that are coming due on an annual basis. This ratio is calculated by taking the long-term and short-term assets of an organization and dividing them by the long-term and short-term liabilities of that organization. Another similarity that the long-term solvency ratio has with the current ratio is that it should be at 1.0 (Martin, 2001). If the ratio is at 1.0 then it has 100% of the assets it needs to cover its debts. XYZ Company’s long-term solvency ratios (shown in Table 2) for 2002-2004 show improvement year after year. The ratio went from 1.26 in 2002 to 1.38 in 2003 (a 0.12 improvement) and from 1.38 in 2003 to 2.06 in 2004 (a 0.68 improvement).
The long-term solvency ratio of the organization should also be considered with the current ratio. The XYZ Non-Profit Corporation current ratio shows the agency is not as financially stable with its short-term liabilities and obligations. The strength of the financial status of the company in the long term solvency ratios shows that the agency has the availability of long-term assets and long-term investments. If the agency needed to it could potentially sell assets or convert long term investments to cash early, if need be, in order to meet current obligations.
Contribution Ratio
Table [ 3 ] | | 2002 | 2003 | 2004 | Contribution Ratio | Largest Revenue Source | $617,169.00 | 0.53 | $632,889.00 | 0.51 | $1,078,837.00 | 0.49 | | Total Revenues | $1,165,065.00 | | $1,244,261.00 | | $2,191,243.00 | |
The contribution ratio is calculated by taking the agencies largest revenue source and dividing that by the total revenues. This calculation shows how dependent the agency is on its biggest source of revenue. In a human services agency this figure is important because many of the sources of income are not guaranteed such as donations, grants, or contracts. Because they are not guaranteed if one of the sources of revenue were to decrease or end then it could have a major derogatory effect on the overall financial status of the agency. It is ideal that this number is as low as possible because, the lower the contribution ratio is, the more diversified the sources of revenue are. If the biggest source of income ends and the contribution ratio is low, then the agency has a greater chance of maintaining financial strength and continuing operations. Ideally, this number should be 0.5 or lower.
The contribution ratio of XYZ Non-Profit Corporation for the years 2002 through 2004 are shown in Table 3. In all three years the largest revenue source for the XYZ Non-Profit Corporation was grant income. Grant income may be subject to federal, state, or local government budget funding availability; it also may be subject to deadlines or eligibility criteria which may change from year to year. In 2002 and 2003 the ratio was above 0.5 figures that it should be below, however in both 2003 and 2004 the number decreased. By 2004, the ratio was at 0.49 and if the decreasing trend continues over time then it will give the agency more financial flexibility in the event that the grants become unavailable in the future.
Program/Expense Ratio
Table [ 4 ] | | 2002 | 2003 | 2004 | Program/Expense Ratio | Total Program Expenses | $834,008.20 | 0.70 | $945,580.00 | 0.72 | $1,526,312.00 | 0.77 | | Total Expenses | $1,185,008.00 | | $1,316,681.00 | | $1,972,131.00 | |
According to Martin (2001) the program/expense ratio is an industry standard “about private nonprofit organizations that can be used by donors to make more informed decisions.” The ratio is calculated by dividing the total program expenses by the total expenses to determine what percentage of total expenses the agency has are program expenses. 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 to clients. This also is proof that the corporation is continuing to exceed the standard set by the NCIB.
General and Management/Expense Ratio
Table [ 5 ] | | 2002 | 2003 | 2004 | General & Management/ Expense Ratio | Total Gen. & Mgmt. Expenses | $351,000.00 | 0.30 | $371,101.00 | 0.28 | $445,819.00 | 0.23 | | Total Expenses | $1,185,008.00 | | $1,316,681.00 | | $1,972,131.00 | |
The general and management expense ratio is essentially an opposite of the program/expense ratio in that it tells how much of an organization’s expenses are related to non-program related expenses. This calculation is completed by dividing the total general and management expenses by the total expenses to determine the percentage of the budget that is being spent on administrative and other costs. These expenses are an indication of how much of the expense money is not able to go to programs or other services that would be related to serving the clients of the organization. It is recommended that an agency that has a ratio of 0.35 or higher should evaluate how they could go about reducing these costs.
Table 5 shows the General & Management/Expense ratio for XYZ Non-Profit Corporation for the 2002, 2003, and 2004 fiscal years. For all three years the ratio has been computed to show that the agency has met the industry recommendation of being at or below 0.35. In addition the number is decreasing each year. Similar to how the increase in the Program/Expense ratio this is another ratio that tells that the organization is finding ways to reduce administrative expenses and find more efficiently serve its clients.
Fundraising Expenses Ratio
Table [ 6 ] | | 2002 | 2003 | 2004 | Fundraising/Expenses Ratio | Total Fundraising Expenses | $117,903.00 | 0.10 | $79,888.00 | 0.06 | $115,999.00 | 0.06 | | Total Expenses | $1,185,008.00 | | $1,316,681.00 | | $1,972,131.00 | |
The fundraising expenses ratio is another important tool in gauging the efficacy of the fundraising activities of a private non-profit organization or agency. The goal is for the fundraising expenses to generate funds at the lowest possible cost. Because each dollar of fundraising expense is one less dollar that is available for program activities, it is recommended that agencies keep this ratio at 0.15 or less. This means that no more than 15 percent of the total expenses of the agency should be used for fundraising activities. The XYZ Non-profit Corporation meets this guideline in each of the three years that the calculation was performed for (2002, 2003, and 2004).
The fundraising expenses ratio calculations shown in Table 6 indicate that the XYZ Non-Profit Corporation had 10 percent of their expenses dedicated to fundraising in 2002, and that the number decreased to just 6 percent in both 2003 and 2004, respectively. This indicates that the agency has improved by minimizing fundraising expenses from 2002 to 2003. The corporation remained stable in 2004 by keeping the fundraising expenses at less than half of the recommendation of .15 percent, thereby allowing more money to go toward programs to serve the clients of the agency.
Revenue Expenses Ratio
Table [ 7 ] | | 2002 | 2003 | 2004 | Revenue Expenses Ratio | Total Revenues | $1,165,065.00 | 0.98 | $1,244,261.00 | 0.94 | $2,191,243.00 | 1.11 | | Total Expenses | $1,185,008.00 | | $1,316,681.00 | | $1,972,131.00 | |
Another important ratio used by private non-profit organizations is the revenue expenses ratio, which is the total revenues divided by the agency’s total expenses.
This number is interpreted to tell how much of a profit a non-profit agency has. In spite of the fact that non-profits do not exist to make money, they also must be careful not to lose so much money that they are unable to continue to provide programs and services. There is no maximum number that a human services agency should not exceed and some excess funds are even recommended to be set aside for financing replacements for worn or malfunctioning assets used for the programs, expansion activities, or unforeseen emergency expenses. This calculation should be at a minimum of 1.0 for the organization to not lose any money. If the number is higher it should not be too much higher, because the higher this number is shows that there are excess funds available that could have been used for programs and …show more content…
services.
The Revenue expenses ratio for the XYZ Non-Profit Corporation fluctuated from 2002-2004 with a low of 0.94 in 2003 and a high of 1.11 in 2004. This reflects that XYZ has had some losses in 2002 and 2003; but by 2004 it created some additional revenues to provide for funding to protect the organization against past/future losses and to fund additional expenses that may arise that will enable the agency to continue to operate.
The line item budget is one of the three most important budgeting systems that is used in human service programs and agencies it provides the management of the agency or organization a way to oversee how or to control the way in which the funds are being spent it is typically divided into several sections expenses and revenues. The purpose is to ensure that the human service agency or organization has set itself up with an approved and workable budget to operate from each fiscal year (Martin, 2001). Because a line-item budget is simple to complete or understand it makes following how staff should utilize funds, if the budget is in balance, or the origin and total of the agency revenues, however the drawback to this type of budget is that it does not allow for the agency to determine the amount of service it provides, the accomplished outcomes, or the cost of service to each client served leaving the agency or organization with no concrete way to determine if they are successful of have failed in their efforts (Martin, 2001) . The program budget helps an agency or organization place its focus on the actual expenses to programs and determine the success or failure based upon the total outcome. There are pros associated with this type of budgeting system in that it offers a clearer picture as to the whether the services being offered are achieving their desired goal or falling short. This better will allow human service organizations or agencies to increase or decrease funding within areas that will better enable them to have a more positive impact on those they provide services it also helps the agency or organization to better know when or where they need to control their cost or compare their current cost with respect to client outcome with other agencies that offer or provide like services (Martin, 2001). Holding an annual special event or fund raiser would be an excellent way to raise money for the XYZ Corporation.
People from the community and surrounding areas could welcome the chance to pull together and host a Christmas feast and auction. Dinners could be purchased at a nominal fee for individuals and families. Businesses from the area could be encouraged to join in and support the cause by donating items to auction after dinner and then we could hold a Christmas dance. Getting a local news personality to come in as auctioneer would definitely buy the event some mention on our local stations resulting in advertising the event. Because the XYZ Corporation has been meeting the needs of the medically indigent for three years now are we are recognized as a 501(c) (3) nonprofit organization we could hold a joint fund raising activity with one of our affiliates such as United Way of America (Martin, 2001). By conducting our annual donor renewal campaign through our volunteers efforts our attempt would be to reach as many of our existing donors either through our mailing list, friends, program members, local business, or by telephone solicitations who may which to make contributions and are in need of reducing their taxable income (Martin, 2001) .
Conclusion
The break-even point of an agency shows how many clients the agency will need in order to meet its costs. Once the break-even point is met then any additional clients would provide profit for the organization. The
breakeven points for the agency outlined in Table 8 (below) reflect the figures in the revenue expense ratio (See Table 7, page 7) to show how the organization did not break even in 2002 or 2003 but had a profit in 2004. | 2002 | 2003 | 2004 | Fixed Cost: Rent & Utilities + Telephone + Management and other | $525,000.00 | $545,101.00 | $619,819.00 | Variable Cost: Payroll + Benefits + Supplies + Other | $660,008.00 | $771,580.00 | $1,352,312.00 | Actual Customers | 5,962 | 6,821 | 11,822 | Break Even Point (BEP)= (Total fixed cost)/((Revenue/customer)-((Variable Cost)/customer)) | 6,197 | 7,866 | 8,734 |
The current ratio is not as strong as it should be however, the long-term solvency ratio tells that the organization does have assets available to cover debts even if they may not be immediately available as cash. The contribution ratio is very closes to the maximum it is recommended to be but decreasing. The program/expense ratio fluctuates between 0.70 and 0.77 over the years 2002-2004 which is a very reasonable number given the fact that it exceeds the industry standards. The general/management expense ratio and the fundraising ratio both improved by decreasing in each year reviewed while the revenue expenses ratio improved by increasing each year.
All in all, the current and future financial future of XYZ Corporation look good. For the most part the organization is doing a good job financially with the ratios being where they should be; which shows that they are making financially sound decisions with managing the budget of the organization. I would anticipate that the organization will be able to serve its clients for years to come.
REFERENCES
Martin, L. (2001). Financial management for human service administrators (1st ed.). Needham Heights, MA: Allyn & Bacon.