6-1 Discussion: Financial Analysis Tools Peer Responses

My Post

For my non-profit organization, I won't keep any finished goods inventory. My nonprofit's performance indicators include whether it can pay its current obligations, whether revenues are enough to cover expenses, and whether it uses debt or equity to finance its operations. To analyze my nonprofit's financial health, I'll utilize at least three ratios. I'll use the Liquidity, Going Concern, and Capital Structure ratios.

Liquidity measures a company's overall financial health and the quantity of current assets that can be swiftly converted to cash. Going Concern Ratio tells me if a nonprofit has the funds to continue operating for an undetermined amount of time until the firm shows signs that it no longer has the resources to operate (Kurnia, 2018). If a company is "going concern," it's successful and not going bankrupt; otherwise, it's failing and going bankrupt. This reveals my nonprofit's performance. By comparing a firm's debt to its equity, capital structure tells me about my nonprofit's success (Alabdullah, 2018).

As a non-profit board member, I'm interested in the liquidity ratio since it tells me how well my organization is performing in terms of short-term (current) cash availability (debts, obligations). A good Liquidity Ratio is important to my nonprofit because it evaluates how quickly a corporation can convert current assets, such as cash, into short-term debt and liabilities. "Quick" or "cash" Liquidity Ratio (Abadi et al, 2019). Concerns A high ratio is important for my non-profit because it indicates a firm will continue operations for the foreseeable future. To ensure that my nonprofit organization is managed by a responsible manager who promotes long-term equity, the capital structure is most important. Members of a nonprofit corporation's board of directors, whether volunteers or employees, can and should pay their employees' fringe benefits and cover the nonprofit's utility bill balance to reduce expenses like salaries and fringe benefits. If the board cuts spending, they can reduce the nonprofit's debt. Depending on the organization's needs, a non-fundraising profit's director can conduct online (virtual) or face-to-face (in-person) fundraisers. This strategy can help a nonprofit cover operating cost. 

References

Kurnia, P., & Mella, N. F. (2018). Opini Audit Going Concern. Jurnal Riset Akuntansi dan Keuangan, 6(1), 105-122.

Abadi, K., Purba, D. M., & Fauzia, Q. (2019). The Impact of Liquidity Ratio, Leverage Ratio, Company Size and Audit Quality on Going Concern Audit Opinion. Jurnal Akuntansi Trisakti, 6(1), 69-82.

Alabdullah, T. T. Y., Laadjal, A., Ries, E., & Al-Asadi, Y. A. A. (2018). Board features and capital structure in emerging markets. Journal of Advanced Management Science, 6(2).