I’m studying for my Accounting class and need an explanation.
As mentioned in Chapter 10 of your textbook, potential donors to a not-for-profit charitable organization are most interested in a “program expense to total expense” ratio calculated from financial statement information. Donors want to obtain a comfort level with their “investment” that the targeted charity manages its non-program expense spending as efficiently as possible. For this exercise, you will practice your skills at analyzing the annual report for a national or local charity that interests you. To add to the challenge, there can be no duplication of the charity selections.
- Choose three not-for-profit organizations of interest to you, and locate their annual report or financial statements. Annual reports can usually be found on the organization’s website. Once you have ascertained that an annual report is available for these charities, go to the discussion board posting and “claim” the three organizations you will use for the assignment. (Having at least one or two backup choices is critical since there will be a few well-known organizations that will be selected early on.)
Note: If you have difficulty finding some organizations or the annual reports or financials, contact your instructor for assistance.
- Once you have been approved by the instructor to proceed with your organizations, find the line item totals for the following in the financial statements/annual report:
- Total revenue,
- Program service expenses, and
- Total expenses.
- Calculate the ratio of the program service expenses to the total expenses. Keep track of the results in a chart that includes the name of the organization, the website where the financial information was found, the three items in step 2, and the calculated program expense ratio.
- Prepare your findings along with your comments on the results of your work. For example, you may find an organization with a 70% ratio, and one with a 90% ratio. Is there anything you noticed in the annual report or know about the company that may have contributed to one organization having a lower ratio than the other? What about the ratio of total expenses to total revenue? Conclude your comments with the organization you would most want to contribute to if you were an interested donor.
Once your organizations are approved, your document should be 250-500 words must have appropriate citation/references