Question: Calculate the following ratios assume depreciation expense is $750,000 for both organizations
19 Aug 2024,4:30 PM
Presented below are financial statements (except cash flows) for two not-for-profit organizations. Neither organization has any permanently restricted net assets.
| ABC Not-for-Profit | XYZ Not-for-Profit | |||||||||||||||
| Statement of Activities | Unrestricted | Temporarily Restricted |
Unrestricted | Temporarily Restricted |
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| Revenues | ||||||||||||||||
| Program service revenue | $ | 5,595,000 | $ | 2,250,000 | ||||||||||||
| Contribution revenues | 3,327,500 | $ | 750,000 | 3,200,000 | ||||||||||||
| Grant revenue | 96,000 | $ | 1,025,000 | |||||||||||||
| Net gains on endowment investments | 17,500 | |||||||||||||||
| Net assets released from restriction | ||||||||||||||||
| Satisfaction of program restrictions | 450,000 | (450,000 | ) | 377,000 | (377,000 | ) | ||||||||||
| Total revenues | 9,390,000 | 396,000 | 5,827,000 | 648,000 | ||||||||||||
| Expenses | ||||||||||||||||
| Education program expenses | 5,621,000 | 1,559,000 | ||||||||||||||
| Research program expense | 1,256,000 | 2,256,000 | ||||||||||||||
| Total program service expenses | 6,877,000 | 3,815,000 | ||||||||||||||
| Fund-raising | 456,000 | 356,000 | ||||||||||||||
| Administration | 650,000 | 1,229,000 | ||||||||||||||
| Total supporting service expenses | 1,106,000 | 1,585,000 | ||||||||||||||
| Total expenses | 7,983,000 | 5,400,000 | ||||||||||||||
| Increase in net assets | 1,407,000 | 396,000 | 427,000 | 648,000 | ||||||||||||
| Net assets January 1 | 4,208,000 | 759,000 | 1,037,500 | 320,000 | ||||||||||||
| Net assets December 31 | $ | 5,615,000 | $ | 1,155,000 | $ | 1,464,500 | $ | 968,000 | ||||||||
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| Statement of Net Assets | ABC Not-for-Profit | XYZ Not-for-Profit | ||||||||||
| Current assets | ||||||||||||
| Cash | $ | 205,000 | $ | 356,000 | ||||||||
| Short-term cash equivalents | 265,000 | 99,000 | ||||||||||
| Supplies inventories | 32,000 | 150,000 | ||||||||||
| Receivables | 439,500 | 188,500 | ||||||||||
| Total current assets | 941,500 | 793,500 | ||||||||||
| Noncurrent assets | ||||||||||||
| Noncurrent pledges receivable | 265,000 | |||||||||||
| Endowment investments | 2,590,000 | |||||||||||
| Land, buildings, and equipment (net) | 3,175,000 | 1,768,000 | ||||||||||
| Total noncurrent assets | 6,030,000 | 1,768,000 | ||||||||||
| Total assets | $ | 6,971,500 | $ | 2,561,500 | ||||||||
| Current liabilities | ||||||||||||
| Accounts payable | $ | 23,000 | $ | 129,000 | ||||||||
| Total current liabilities | 23,000 | 129,000 | ||||||||||
| Noncurrent liabilities | ||||||||||||
| Notes payable | 178,500 | |||||||||||
| Total noncurrent liabilities | 178,500 | |||||||||||
| Total liabilities | 201,500 | 129,000 | ||||||||||
| Net Assets | ||||||||||||
| Unrestricted | 4,025,000 | 2,364,500 | ||||||||||
| Donor restricted for purpose | 155,000 | 68,000 | ||||||||||
| Donor restricted for endowment | 2,590,000 | 0 | ||||||||||
| Total net assets | 6,770,000 | 2,432,500 | ||||||||||
| Total liabilities and net assets | $ | 6,971,500 | $ | 2,561,500 | ||||||||
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Required:
a. Calculate the following ratios (assume depreciation expense is $750,000 for both organizations and is allocated among program and supporting expenses):
- Program expense.
- Fund-raising efficiency.
- Days cash on hand.
- Working capital (expressed in days).
b. For each ratio, which of the two organizations has the stronger ratio.
(Assume 365 days in a year. Do not round intermediate calculations. Round "Program expense" answers to 1 decimal place and "Fund-raising efficiency" answers to 3 decimal places and "Days cash on hand", "Working capital" answers to nearest whole number.)
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