Streetsmart Financial Basics for Nonprofit Managers Copyright 2002 Thomas A. McLaughlin Financial Analysis Using a Few Calculations* *But not many, and they’ll be pretty easy

Streetsmart Financial Basics for Nonprofit Managers Copyright 2002 Thomas A. McLaughlin Financial Indicators Liquidity Capital structure Profitability

Streetsmart Financial Basics for Nonprofit Managers Copyright 2002 Thomas A. McLaughlin Liquidity The ability to raise cash in the short term Current ratio Days’ Cash Days’ Receivables

Streetsmart Financial Basics for Nonprofit Managers Copyright 2002 Thomas A. McLaughlin Current Ratio Current assets/Current liabilities Suggests to what degree the organization has enough cash, or cash equivalents, to meet its immediate obligations.

Streetsmart Financial Basics for Nonprofit Managers Copyright 2002 Thomas A. McLaughlin Current Ratio for Youth Haven $88,556/55,050 = 1.61

Streetsmart Financial Basics for Nonprofit Managers Copyright 2002 Thomas A. McLaughlin Days’ Cash Cash & equivalents × 365 Operating Expenses - Depreciation If an organization suddenly has to live off its cash accounts only -- no more cash is coming in -- how long will it survive if it continues to spend at its usual daily rate?

Streetsmart Financial Basics for Nonprofit Managers Copyright 2002 Thomas A. McLaughlin Days’ Cash for Youth Haven $35,539 × 365 $553,152 - $12,453 = 24

Streetsmart Financial Basics for Nonprofit Managers Copyright 2002 Thomas A. McLaughlin Days’ Receivables Accounts receivable × 365 Operating Revenue For organizations that provide services for a fee or hold government contracts, how long does it take, on average, to be paid?

Streetsmart Financial Basics for Nonprofit Managers Copyright 2002 Thomas A. McLaughlin Days’ Receivables for Youth Haven $52,610 × 365 $400,741 = 48

Streetsmart Financial Basics for Nonprofit Managers Copyright 2002 Thomas A. McLaughlin Capital Structure Resources that have been put into the organization by outsiders – “Sticky Money” Debt to Net Assets Accounting Age of Property, Plant and Equipment

Streetsmart Financial Basics for Nonprofit Managers Copyright 2002 Thomas A. McLaughlin Debt to Net Assets Long-term Liabilities Net Assets Compares the total amount of long-term debt to the total net assets (“net worth”) of the organization to see how much of the latter could potentially be claimed by outside lenders.

Streetsmart Financial Basics for Nonprofit Managers Copyright 2002 Thomas A. McLaughlin Debt to Net Assets $201/$89,634 = 0

Streetsmart Financial Basics for Nonprofit Managers Copyright 2002 Thomas A. McLaughlin Suggests how well an organization keeps up its investment in tangible assets like computers, buildings, vehicles, etc. Accounting Age of Plant, Property and Equipment Accumulated Depreciation Depreciation Expense

Streetsmart Financial Basics for Nonprofit Managers Copyright 2002 Thomas A. McLaughlin Accounting Age of Plant, Property and Equipment $65,134/$12,453 = 5.2

Streetsmart Financial Basics for Nonprofit Managers Copyright 2002 Thomas A. McLaughlin Profitability Revenue - Expenses Revenue The famous “bottom line”

Streetsmart Financial Basics for Nonprofit Managers Copyright 2002 Thomas A. McLaughlin Profitability $506, ,152/$506,336 = (9.25%)

Streetsmart Financial Basics for Nonprofit Managers Copyright 2002 Thomas A. McLaughlin Putting It All Together Youth Haven, Inc. Financial Statement Analysis Liquidity Current ratio Days’ Cash2433 Days’ Receivables4834 Capital Debt to Net Assets0.03 Accounting Age Profitability Total Margin %3.08%

Streetsmart Financial Basics for Nonprofit Managers Copyright 2002 Thomas A. McLaughlin Conclusion Refer to the book for additional analyses and observations. Think about what you would do in this situation. Be sure to listen to the “Red Flag, Yellow Flag” talking presentation also on this disk. Use the rest of the tools presented in the book – this is knowledge. This is empowerment.