Financial ratio analysis of a nonprofit organization versus Charlottesville

¶ … financial position of the nonprofit organization is designed to provide specific insights about its liquidity, long time solvency and assets management ratios. These areas will help to determine if the entity is facing tremendous financial challenges. Moreover, they will highlight how administrators can seize upon new opportunities in the future.

To determine the strength of the nonprofit organization a comparison will be conducted with the city of Charlottesville. The below table is contrasting various financial ratios.

The Liquidity, Long Time Solvency and Asset Management Ratios for the Non-Profit vs. Charlottesville

Nonprofit (Table 9.4)

Charlottesville 2005

Current Ratio

Working Capital

$1,041,067

$32,953,718

Quick Ratio

Debt to Asset Ratio

.17

("Financial Statement for a Small Nonprofit," 2006) ("City of Charlottesville Net Assets," 2005)

Analyze the comparison of ratios

The current ratio is showing that the nonprofit is in a better financial condition to address short-term obligations and liquidity challenges. This is because they are several times higher than the figures for the city of Charlottesville. The working capital and quick ratios are illustrating a similar situation when it comes to the two entities. The debt to asset ratio is showing how the nonprofit has financed less of their assets with debt in contrast to the city of Charlottesville. These figures are indicating the nonprofit is in a stronger fiscal position. (Gibson, 2008) ("Financial Statement for a Small Nonprofit," 2006) ("City of Charlottesville Net Assets," 2005)

Analyze the measures of liquidity

The measures of liquidity are indicating that the nonprofit can be able to fund its short- and long-term operations. This is because it has readings which are 3 to 4 times higher in contrast with Charlottesville. In the future, they have the ability to deal with a host of financial challenges more effectively and can use these tools to make adjustments quickly. (Gibson, 2008) ("Financial Statement for a Small Nonprofit," 2006) ("City of Charlottesville Net Assets," 2005)

Analyze asset management rations

Management made long-term decisions for the nonprofit that will help to ensure they can achieve different objectives. This is because they did not finance their future growth and current operations based upon increasing their overall debt levels. Instead, they kept these amounts low and invested in assets that increased their liquidity and financial position. While the city of Charlottesville decided to use their debt to help fund their operations and enhance the services they are providing. The problem is that these high levels will create budgetary and liquidity challenges that must be addressed in the future. (Gibson, 2008) ("Financial Statement for a Small Nonprofit," 2006) ("City of Charlottesville Net Assets," 2005)