NPM700 Lecture Notes - Lecture 10: Financial Statement Analysis, Making Money
Document Summary
Comparisons to previous years is often a key discussion point. Interpreting the bottom line is tricky in a non-profit. Donors don"t want to see large surpluses because they want their donations to be used. A number without a narrative isn"t helpful. Expense ratios exist but their value is limited: donors often want to know how much of their donation goes to directly helping others versus administrative and fundraising costs. The common ratios are: program expenses to total expenses, administrative expenses to total expenses, fundraising expenses to total expenses, donation revenue to fundraising expenses. Expense ratios cont"d : ratios have limited value because, there"s no universal definition of program versus administrative costs. Is the cost of brochure a program expense or an administrative expense: efficiency is not the same as effectiveness. If an organization is spending very little on fundraising, it may receive very little donations. The ratio is low but so is the income!
