CAn a non-profit organization utilize ratios to assess financial
strength and if so how?

I need a quick answer if at all possible.

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Clarification of Question by baseball2-ga on 07 Apr 2005 19:19 PDT

I work for Mayo Clinic in Rochester Minnesota. I am confused as to how
Mayo as an unprofit organization can utilize a ratio for determining
financial infomatinion.


If you can help me I would be very greatful.

Hi! Thanks for the question.

Yes! A non-profit organization can use ratios to analyze financial strength.

"Financial analysis can tell you a lot about how your nonprofit is
doing. Without this analysis, you may end up staring at a bunch of
numbers on budgets, cash flow projections and financial statements.
You should set aside at least a a few hours every month to do
financial analysis."

"Basic Guide to Non-Profit Financial Management"
http://www.mapnp.org/library/finance/np_fnce/np_fnce.htm#anchor1733946


Our next article provides insights on the importance of such ratios to non-profits.

"The nontechnical argument goes like this. If I am a donor who wants
to see a goal accomplished, I should be happy if my donation leads to
more progress toward that goal. Only when the marginal return from
fundraising efforts is negative -- ie, the last dollar spent results
in less than a dollar of contributions -- does the fundraising effort
impede my interests as a donor."

"Are Ratios Useful? For Donors? For the Community?"
http://www.nonprofits.org/npofaq/11/14.html


The next link meanwhile gives the use of ratios in certain situations
like when you ask about usage of donation. An example will be "What
portion of my gift might be used for program". The article talks about
dividing Program Expense by Total Support/Revenue as a possible
solution. Please see the section on Ratios in the following link.

"Questions Donors Ask and How They Can Be Answered By the Financial
Statements of Not-For-Profit Organizations"
http://www.nonprofits.org/misc/fps/questions.html


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