Analyzing Financial Statements Free Essays

HSM 260 Analyzing Financial Statements By Darrell L. Lee Axia College of University of Phoenix October 31, 2012 Instructor: Danette Brown Calculate the following: Current ratiolt; Long-term solvency ratio, contribution ratio, programs/expense ratio, general and management/expense ratio, and revenue/ expense ratio for the years 2003 and 2004. Current ratio = current Assets Current Liabilities 2003 Current Ratio = [pic] Current Ratio = 0. We will write a custom essay sample on Analyzing Financial Statements or any similar topic only for you Order Now 87 2004 Current Ratio = Current Assets Current liabilities Current Ratio = [pic] Current Ratio = 0. 90 (rounded –up) Long-Term Solvency Ratio Long- Term†¦ Solvency Ratio = Total Assets Total Liabilities Long- Term†¦ Solvency Ratio = [pic] Long- Term†¦ Solvency Ratio = 1. 38 2003 Contribution†¦ Ratio = Last revenue source Total Revenue Contribution†¦ Ratio = [pic] Contribution†¦ Ratio = 0. 51 (rounded-up) 2004 Contribution†¦ Ratio = Last revenue source Total†¦ Revenue Contribution†¦ Ratio = [pic] Contribution†¦ Ratio =0. 49 Program Expense Ratio 2003 Program/ Expense Ratio = Total Revenue Total Expense Program/Expense Ratio = [pic] Program/Expense Ratio = 1. 0 2004 Program/Expense Ratio = Total Revenue Total Expense Program/ Expense Ratio = [pic] Program/ Expense Ratio = 1. 11 2003 Management/Expense Ratio = Total General and Management Expense Total Expenses Management/Expense Ratio = [pic] Management/Expense Ratio = 0. 28 (rounded –Up) 2004 Management/Expense Ratio = Total General and Management Expense Total Expenses Management/Expense Ratio = [pic] Management/Expense Ratio = 0. 33 (Rounded –up) Revenue/Expense Ratio 2003 Revenue/Expense Ratio = Total Revenue Total Expenses Revenue/Expense Ratio = [pic] Revenue/Expense Ratio = 0. 94 2004 Revenue/Expense Ratio = Total Revenue Total Expenses Revenue/Expense Ratio = [pic] Revenue/Expense Ratio = 1. 11 Include the current ratio, long-term solvency ratio, contribution ratio, program/expense ratio, general and management/expense ratio, and revenue/expense ratio calculated in week four Assignment. 2002 Current Ratio = Current Assets Current Liabilities Current Ratio = [pic] Current Ratio = 0. 75 2002 Long-term Solvency Ratio = Total Assets Total Liabilities Long-term Solvency Ratio = [pic] Long-term Solvency Ratio = 1. 26 2002 Contribution Ratio = Last Revenue Source Total Revenue Contribution Ratio = [pic] Contribution Ratio = 0. 53 Program/Expense Ratio = Total Revenue Total Expense Program/Expense Ratio = [pic] Program/Expense Ratio = 1. (Rounded –up) 2002 Management/Expense Ratio = Total General and Management/Expense Total Expenses Management/Expense Ratio = [pic] Management/Expense Ratio = 0. 30 (Rounded –Up) 2002 Revenue/Expense Ratio = Total Revenue Total Expense Revenue/Expense Ratio = [pic] Revenue/Expense Ratio = 0. 98 Provide a 200- to 300-word explanation of the importance of each ratio for all three years listed in Appendix D. Include a statement of whether the organization’s financial picture has improved or not within the three-year period specified in Appendix D. Appendix D lists 5 ratios that are each important in different ways. A non-profit organization uses the current ratio to evaluate some of its assets. These assets are both cash and other things that could be changed into cash, and they might be used if necessary to pay their costs of operating. A non-profit organization uses the long-term solvency ratio to find out if they are likely to be able to pay their bills. This ratio will tell the non-profit exactly how much they depend on contributions from other sources outside of their organization. The organization uses the management/expense ratio to tell them how much they should set aside for administrative costs, besides their program costs. If they save too much money in this category, they can spend less money on their programs. The revenue/expense ratio tells them how much funding they have used to support their fund-raising. The revenue/expense ratio is like the management/expense ratio because if too much money goes into revenue/expense, not enough will go to their programs. Calculate the fixed cost, variable cost and break-even point for the XYZ Corporation for the years 2003 and 2004 listed in Appendix D. Expenses20032004 Program Services Payroll/Benefits $520,069. 00 $915,787. 20 Supplies $171,622. 7 $ 320,525. 52 Rent/Utilities $150,000. 00 $150,000. 00 Phone $24,000. 00 $24,000. 00 Other $79,888. 00 $115,999. 00 Management/Other $371,101. 00 $ 445,819. 00 Total Expense $1,361,681. 00 $ 1,972,131. 00 Variable Cost:20032004 Supplies: $171,622. 77 $320,525. 52 $171,622. 77 + $320,525. 52 = $ [pic] = $264. 074 Fixed Cost20032004 Rent and Utilities $150,000. 00 $150,000. 00 Telephone $24,000. 00 $24,000. 00 $174,000 *2 = $348,000. 00 = [pic] = $261,000. 00 Break-even Point Customers:20032004 ,821 11,822 6,821 + 11,822=18,643 [pic] = 9,322 PX = A + BX 9322 X = 174,000 + 246,074 X 9322 X = 174,000 + 22,939,018. 28 X = 22,940,758. 28 Include the fixed cost, variable cost, and break-even point for the XYZ Corporation for the year 2002 from the week Six Checkpoint Average Variable Cost per Unit: $1,011. 00 20028 **** $417,004 + $ 125,101. 20 +$117,903 + $ 351,000 1, 142, 683 20031 ****$520,069 + $ 171,622. 70 +$79,888 + $371. 101 1,798,113 20041 ****$915,789. 50 +$320,525. 52 +$115,999 +$445,819 $3, 951, 82 Total0 Number of years 3 1, 317, 27 Average VC3 Average Customers 8,202 Average VC per Unit$ 161 $174,000. 00 Fixed Cost:0 ****150,000 + 24,000 Breakeven Breakeven = Fixed cost / (Average Revenue per unit- Average VC Per unit) Breakeven = $174,000 / ($187 – $ 161) Breakeven = $174,000 / $26 Breakeven = 6,682 Customers Discuss the purpose, advantages, disadvantages, and type of feedback pro vided by a line item, performance, and program budget in a 350- to 700-word essay. Using performance, line-item, and program budget systems has a few advantages. Each system is best for a particular reason. Each system has both is pros and its cons. The administration will consider the needs of its organization, and with this in mind choose which system they should use. Martin (2009) explains, â€Å"The three major budgeting systems (line-item, performance, and program) provide the financial performance feedback in a performance measurement system† (p. 77). A performance budgeting system’s most important advantage is that it gives the administration information about the cost of the organization’s â€Å"outputs. †For example, this performance budgeting system calculates the cost to the organization of particular individual services. If this budget is related to a homecare program, it would take into account even service that is included in or related to the homecare service– for instance, if there is a separate charge for administration of medicines or for travel time. Only the program-level is the right place for this kind of budget system. This kind of budget also gives a great deal of detail, which makes it often better than line-item budgeting. One disadvantage to performance budgeting is that it is more difficult to calculate. An umbrella is a useful metaphor for a program budgeting system. It reaches over each of the individual program expenses. A cafeteria, for example, has expenses like supplies, utilities, salaries. A program budget does not list each individual expense; it instead gives the program a total figure of cost. Administration can use a program budget to look at the smaller parts of the total budget. This system’s disadvantage is that it only applies at the program level and does not give any details about which expenses come from what. A simpler kind of budget system is the line-item, which is easy to use. Administration can quickly read a line-item budget and use it to predict the future expenses of the organization. If there is any question of verification, the information can be accessed at any time. A line-item system would take into account particular things like salaries, donations, and the operating expenses of the organization– like utilities or the phone. A line-item budgeting system, though, is not suitable for use by a large organization, which is a disadvantage. It does not outline what the organization spends on the costs of its programs. Both a performance budget and a program budget are used at the program level, but a program budgeting system and a performance budget system operate in different ways. The biggest difference is that a performance budget calculates how much each of the organization’s individual services costs them. For examples, for the homecare program, this kind of budget would take all of the services offered with the homecare program into account in its budget for this program. These could be particular charges for medicine administration or for time spent traveling, for example. An umbrella is a useful metaphor for a program budgeting system. It reaches over each of the individual program expenses. A cafeteria, for example, has expenses like supplies, utilities, salaries. A program budget does not list each individual expense; it instead gives the program a total figure of cost. Administration can use a program budget to look at the smaller parts of the total budget. A human service agency must always keep its expenses in mind. They need the kind of detailed information that comes from a performance budgeting system in order to know exactly how much each service costs them. Keeping this kind of budget lets the administration guess how much things will cost in the future, and change their costs if the need to. A program budget lets the administration know exactly how much their programs costs, so that they can adjust their costs by looking at the budget. The program budget tells their administrators how much each of their programs costs compared to others. Provide a 350- to 700-word response to the following: Identify and describe two types of traditional approaches to fund development, and two types of nontraditional approaches to f und development that would be appropriate for the XYZ Corporation, and provide a conclusion of the organization’s current and future financial picture. An agency can try several different kinds of fund development. Each of these forms is to attain the same purpose – the help the agency to reach the funds for a particular goal. Traditional approaches to fund development: Fund raising: The organization might have scheduled Campaigns to ask for money in an organized way large company might give the organization a donation that would then lower their own taxable income. Most organizations use the mail or telemarketing to get publicity for their campaigns. †¢The organization might have Special events To raise funds through auctions or other rewards for donations, they might use a raffle or a walk-a-thon, among other ways, to raise funds in this form. †¢Client’s donations: Is another source of funding for an organization, a client might give donations to an organization without hoping for any reward or service, often from gratitude. Entrepreneurial approaches to fund development: Entrepreneurial approach: Affinity marketing Is a joint venture between a vendor and an organization which raises money for the organization? A store could tell its customers, for example, that they will contribute a set portion of their profit to a particular organization. This relationship benefits both parties involved with it. The vendor wins because they make a profit on each item and bring in more customers. The customer gets the satisfaction of contributing to a cause and buying something that they want. The organization wins because they get funds with little to no effort. †¢An individual might contribute from their estate with a Be quest program. This way, a person leaves money for an organization in their will. The organization might decide to enter into a Commercial venture: An organization could sell its services to people who can pay in many ways. Willing clients with handicrafts skills might donate things that the organization could sell on the internet. This kind of fundraising needs a lot of planning and organizing, and the organization still needs to keep receiving donations while they plan their commercial venture. The venture itself might require extra costs. People might be more willing or able to donate items to support an organization than to donate cash. Reference: Martin L. (2001). Financial Management for Human Service Administration, Boston, MA Allyn and Bacon How to cite Analyzing Financial Statements, Papers Analyzing Financial Statements Free Essays string(19) " A ratio of over \." Analyzing Financial Statements Elizabeth Black HSM/260 October 16, 2011 Denise Lindley University of Phoenix Analyzing Financial Statements XYZ Corporation Years 2003/2004/2002 (Respectively Listed One Page after Another) 2003 Current Ratio| | | | | | | | | | | | | | | | | Current Ratio =| Current Assets| | $82,058. 00 | | | 0. 87| | | Current Liabilities| | $93,975. We will write a custom essay sample on Analyzing Financial Statements or any similar topic only for you Order Now 00 | | | | | | | | | | | | | | | | | | | | | | Long-Term Solvency Ratio| | | | | | | | | | | | | | | | Long-Term Solvency Rate = | Total Assets| $359,863. 00 | | | 1. 39| | | | Total Liabilities| $259,979. 00 | | | | | | | | | | | | | | | | | | | | | Contribution Ratio| | | | | | | | | | | | | | | | | Contribution Ratio=| Largest Revenue Source| $632,889. 00 | | | 0. 51| | | Total Revenues| | $1,244,261. 00 | | | | | | | | | | | | | | | | | | | | | | Programs and Expense Ratio| | | | | | | | | | | | | | | | Programs/Expense Ratio= | Total Program Expenses| $865,692 | | 0. 66| | | | Total Expenses| | $1,316,681. 00| | | | | | | | | | | | | | | | | | | | | General and Management and Expense Ratio| | | | | | | | | | | | | | | | Total General and Management Expenses| $ 450,989| | 0. 4| | | Total Expenses| | | $1,316,681. 00 | | | | | | | | | | | | | | | | | | | | | Revenue and Expense Ratio| | | | | | | | | | | | | | | | Revenue/Expense ratio= | Total Revenues| | $1,244,261. 00 | | 0. 9 5| | | | Total Expenses| | $1,316,681. 00 | | | | | | | | | | | | Fund Raising/Expense Ratio| | | Total Fund-Raising Expenses| | | $79,888. 00| | . 06| (Note on this Page)Total Expenses $1,316,681. 00 (Please note), There is no category for fund raising expenses, so I took the figure in the â€Å"Other† column. 2004 Current Ratio| | | | | | | | | | | | | | | | Current Ratio =| Current Assets| | $302,902. 00 | | | 0. 90| | | Current Liabilities| | $337,033. 00 | | | | | | | | | | | | | | | | | | | | | | Long-Term Solvency Ratio| | | | | | | | | | | | | | | | Long-Term Solvency Rate = | Total Assets| $699,004. 00 | | | 2. 06| | | | Total Liabilities| $338,937. 00 | | | | | | | | | | | | | | | | | | | | | | Contribution Ratio| | | | | | | | | | | | | | | | | Contribution Ratio=| Largest Revenue Source| $1,078,837. 00 | | | 0. 51| | | Total Revenues| | $2,191,243. 00 | | | | | | | | | | | | | | | | | | | | | | Programs and Expense Ratio| | | | | | | | | | | | | | | | Programs/Expense Ratio= | Total Program Expenses| $1,410,312. 00 | | 0. 66| | | | Total Expenses| | $1,972,131. 00| | | | | | | | | | | | | | | | | | | | | General and Management and Expense Ratio| | | | | | | | | | | | | | | | Total General and Management Expenses| $ 561,818. 00| | . 29| | | Total Expenses| | | $1,972,131. 00| | | | | | | | | | | | | | | | | | | | | Revenue and Expense Ratio| | | | | | | | | | | | | | | | Revenue/Expense ratio= | Total Revenues| | $2,191,243. 00 | | 1. 11| | | | Total Expenses| | $1,972,131. 0 | | | | | | | | | | | | Fund Raising/Expense Ratio| | | Total Fund-Raising Expenses| | | $115,999. 00| | . 06| Total Expense $1,972,131. 00 2002 Current Ratio| | | | | | | | | | | | | | | | | Current Ratio =| Current Assets| | $104,296. 00 | | | 0. 75| | | Current Liabilities| | $139,017. 00 | | | | | | | | | | | | | | | | | | | | | | Long-Term Solvency Ratio| | | | | | | | | | | | | | | | Long-Term Sol vency Rate = | Total Assets| $391,270. 00 | | | 1. 26| | | | Total Liabilities| $310,246. 0 | | | | | | | | | | | | | | | | | | | | | | Contribution Ratio| | | | | | | | | | | | | | | | | Contribution Ratio=| Largest Revenue Source| $617,169. 00 | | | 0. 53| | | Total Revenues| | $1,165,065. 00 | | | | | | | | | | | | | | | | | | | | | | Programs and Expense Ratio| | | | | | | | | | | | | | | | Programs/Expense Ratio= | Total Program Expenses| $ 716,105. 20 | | 0. 6| | | | Total Expenses| | $1,185,008. 00 | | | | | | | | | | | | | | | | | | | | | General and Management and Expense Ratio| | | | | | | | | | | | | | | | Total General and Management Expenses| $ 468,903. 0 | | 0. 4| | | Total Expenses| | | $1,185,008. 00 | | | | | | | | | | | | | | | | | | | | | Revenue and Expense Ratio| | | | | | | | | | | | | | | | Revenue/Expense ratio= | Total Revenues| | $1,165,065. 00 | | 0. 98| | | | Total Expenses| | $1,185,008. 00 | | | | | | | | | | | | Fundraising /Expense Ratio| | | Total Fu ndraising Expense| | | $117,903. 00| | 0. 1| Total Expense $1,185,008. 00 Synopsis and Ratio Explanations It is very important for organizations to know how well they are doing financially when most efforts are being made to serve clients. It is easy to forget that pouring money into a problem will not fix it unless revenue flows continue or are increased and expenses are controlled. Some of the easiest computations can be made with information retrieved from balance sheets and income statements provided by accountants. Ratios such as the current ratio, long-term solvency ratio, contribution ratio, programs and expense ratio, general and management expense ratio, fund-raising and expense ratio, and revenue and expense ratio can provide a picture of where a company stands now compared to where it was in past years and what may need to be done in the future. The current ratio gives a picture of the liquidity of an agency; the amount of cash and other assets which can be easily accessed for use to pay expenses. The current ratio is expected to be over 1. 0; if it is less, the agency may have problems meeting its obligations. In this scenario, each year the ratio has shown that XYZ is getting closer to 1. 0; 2002 reflected . 75, while by 2004 it has increased to . 90. This means that while it still may make it difficult to pay obligations, the situation has gotten much better. The purpose of the long-term solvency ratio is to provide insight on how well an agency will be able to pay their annual expenses as they come due. The result of the ratio should be at least 1. 0, but the higher the number the better; if it is less than 1. 0, the viability or likelihood of existence is questionable. (Martin, 2001) In 2002, a figure of 1. 26 was acceptable, but in 2004 it has risen to 2. 06; this is a good figure and shows that the organization is improving in its financial planning and will more than likely remain viable. The contribution ratio is used to show to what extent an agency is dependent upon their main funding source. It is best for an organization to have their revenues spread through many sources rather than becoming dependent on only one or two which may or may not fund them in the future. If the figure calculated is above . 5, the agency is overly dependent on one source of revenue. XYZ Corporation needs to look for more sources of funding. Their contribution ratio is . 53 for 2002 and has remained stable in 2003 and 2004 at . 51. While their dependence has dropped a little bit, they are still working in the danger zone. The programs and expense ratio is based upon a standard set by the National Charities Information Bureau (NCIB). This agency provides the standards which show whether or not a program is making or not making the grade as far as how much of programs expenses are in comparison to overall expenses. It is expected that this ratio be a minimum of . 60. In 2002, XYZ Corporation produced a ratio of . 60; in 2003 and 2004, this number raised to . 66. The beginning figure is acceptable, but the rise in ratios for 2003 and 2004 is even better. The general and management xpense ratio identified how much money is spent on administration of the agency in comparison to the total expenses. If the calculated figure is greater than . 35, the organization should begin to cut the costs related to administration. XYZ Corporation has consistently brought their administrative costs down. Beginning in 2002 this organization had a . 40 ratio, which is unacceptable; then in 2004 a figure of . 29 which is wel l within acceptable range. The fund-raising expense ratio basically tells how much money is being spent related to the total expenses in order to raise revenues to be used by the agency. A ratio of over . 15 is a sign that more money is being spent than necessary to raise the funds needed by the agency; this means that less can be spent for essential services. In 2002, XYZ Corporation’s ratio was . 1, which is within acceptable limits; in 2003 and 2004, they reduce their amount still farther to . 60. While this rate is very good, it is important to be aware that cutting this ratio too close may actually limit the revenues of the agency; some money needs to be spent to identify and court some funding sources or those potential revenues may be lost. The revenue expense ratio is a very important figure in understanding where an organization stands. This ratio informs the reader whether the agency is making money, losing money, or breaking even. It gives a starting point for making decisions about whether a program should continue, if it should be re-evaluated, or if it should be discontinued. The financial management team should be held accountable to the figures they produce and be able to explain shortfalls or positive changes. The acceptable figure for this ratio is 1. 0 or greater. In 2002, this agency had a ratio of . 8, which is just below acceptable. Through hard work it appears that they have raised this number to 1. 11. This is a big change and shows that XYZ is working to make their organization more stable. Overall, based on these figures, this corporation is taking positive steps towards making their agency viable, effective, and efficient. All of their ratios reflect movement towards acceptable levels and if history predicts future behavior, they will continue to grow and be able to provide services for their clients without fear of insolvency. They do need to work on getting more grantors instead of having one major source of revenue, but even now they have increased to two major donors. This in itself is a major accomplishment. XYZ Corporation Fixed Costs, Variable Costs, and Break-even Point Comparison of Years 2002, 2003, and 2004 (respectively) 2002 Fixed Costs for 2002 in Expenses: Rent and Utilities| $150,000. 00 | Telephone| $24,000. 00 | Management and other| $351,000. 00 | Total Fixed Costs| $525,000. 00| Variable Costs for 2002 in Expenses: Other Expenses $117,903. 00 Payroll and benefits| $417,004. 00 | Supplies| $125,101. 20 | Total Variable Costs$660,008. 20 Rounded to $660,008. 00 Per Appendix D What is the BEP for the program since we see that they were in the red for the year? Total Fixed Costs = $525,000 Total Variable Costs = $660,008 Revenue per Customer = Total Revenue/Total Customers $1,165,065. 00/5962 = $ 195. 42 Variable Cost per Customer = $660,008/5962 = $110. 70 BEP = Total Fixed Costs/ (Revenue per Customer – Variable Costs per Customer) BEP = $525,000/($195. 42 – $110. 70) = $525,000/ $84. 72 = 6196. 88Rounded to 6197 2003 Fixed Costs Rent and Utilities $150,000 Telephone 24,000 Management and Other 371,101 $545,101 Variable Costs Payroll and Benefits $520,069 Supplies 171,623 (rounded up the $. 77) Other Expenses 79,888 $771,580 Break-Even Point Total Fixed Costs = $545,101 Total Variable Costs = $771,580 Revenue per Customer = Total Revenue/Total Customers $1,244,261. 00/6821 = $182. 42 Variable Cost per Customer = $771,580/6821 = $113. 12 BEP = Total Fixed Costs/ (Revenue per Customer – Variable Costs per Customer) BEP = $545,101/($182. 2-113. 12) = $545,101/ $69. 30 = 7866Rounded to 7,866 because there is no way to have a partial person and at 7865, we will not make break-even. 2004 Fixed Costs: Rent and Utilities $150,000 Telephone 24,000 Management and other 445,819 619,819 Variable Costs: Payroll and Benefits $915,787 (rounded down) Supplies 320,526 (rounded up) Other Expenses 115,999 $1,352,312 Total Fixed Costs = $619,819 Total Variable Costs = $1,352,312 Revenue per Customer = Total Revenue/Total Customers 2,191,243/11,822 = $185. 35 Variable Cost per Customer = $1,352,312/11822 = $114. 39 BEP = Total Fixed Costs/ (Revenue per Customer – Variable Costs per Customer) BEP = $619,819/($185. 35 – $114. 39) = $619,819/70. 96 = 8,735Rounded to 8,735 Budgeting There are three basic types of budgeting which apply to human service organizations; line item, performance, and program budgets. Deciding which method will be best for a given agency depends on what information they wish to retrieve and from perspective they wish to look at revenues and expenditures. By listing the advantages and disadvantages of each method, a inancial management professional or Executive Director may make the appropriate decision on which format to use. Line budgeting is the most utilized budgeting method because it simplifies how money is allocated and how well each program is controlling expenditures. (Martin, 2001) Because of its simplicity, employees, financial managers and laymen can readily identify key pieces of information. Financial control is the basic purpose for this type of budgeting. Line item budgets are easy to prepare, easy to justify and easy to understand. They provide specific information as to where money is allocated and for what purposes. There are two major disadvantages to line item budgeting; lack of relationship between the budget, objectives, and the outcome of the program. The second disadvantage is that there is no real way to estimate what the future holds; line item budgets are always based on historical data which may not properly reflect the current situation. The purpose of â€Å"performance budgeting is to relate agency expenses to programs by determining (a) a program output (or unit of service) performance measure, (b) the total program cost, and (c) the cost per output of service. (Martin, 2001) The advantages to this type of budget program are similar to program budgets; with the difference being the concentration of quantity over quality. Being able to know how much a particular output costs gives managers a real picture how much is being spent to provide client services. If adjustments need to be made, they can do so as the program advances or declines in services rendered. This method addresses no t only how a budget will be broken down for departments, but also the efficiency of what departments are meeting their budgetary goals while serving the most clients (based on how outcomes are represented). Fixed costs are added into the budget line items. A disadvantage of performance budgets are that while they do show how many clients are services and at what cost, they do not concern themselves with quality. If quality of service is not a concern then it shows people as numbers, rather than as important beings we are supposed to serve. The other major disadvantage is that calculations can be difficult and require more computer input than the basic line-item type budget. While many calculations can be done by hand, many also need more complex programs to provide appropriate data. Program budgets are concerned with an agency’s activities rather than its expenditures. The cost per outcome is the main concentration of the financial manager and gives information about the success or failure of the program. This is perhaps the best type of budgeting for agency’s that need to know whether they should continue, reorganize, or discontinue their program. The major advantages to this type of budgeting are that it is easier to evaluate programs since costs are tied to results, priorities may be changed quickly and with a minimal amount of work, and programs are broken down into smaller, more manageable budget units. This type of budget concentrates of effectiveness, not just efficiency. The disadvantage is that it is difficult to get all to agree what an acceptable outcome will be for budgetary purposes. The fact exists that if an outcome is only defined as a specific ending, major positive changes in a client’s case may be overlooked as not an outcome. Another disadvantage is that the analysis can be time consuming and difficult. To understand the data which is produced, most people would have to have an accounting background or someone who can explain the reports to them. Fund-Raising—Traditional versus Non-Traditional Organizations from everywhere are begging for funding to keep their programs going and expand services they can offer to their clients. Traditional sources such as government grants, private donor grants (individual or corporate), annual support mailings, and the United Way may offer some assistance, but the reality is that money is a limited commodity and all agencies need more of it. While each type of traditional funding may allow only certain types of programs or projects which target specific groups based on acceptance criteria, there are others that give general funding. The process to receive these funds may involve grant writing, volunteers to send out mailers, and liaisons with other agencies; paperwork and attention to detail are very important in attaining these types of funding. Non-traditional methods arise from much different styles and perspectives. While the â€Å"chunks† of money may be smaller, they do have benefits that more traditional methods offer. We all hate telemarketers, but how would we feel about children from our church calling about a pizza sale to benefit their summer program? The pizzas could be bought in bulk under a discount program that companies offer and then picked up at the church on a given day. Most would probably spend money to help people they know earn money for a good cause. A second non-traditional method of fund-raising is to community rummage sale. Most people have lots of good â€Å"stuff† that they think has value, but have little time or inclination to have a yard sale. By donating these goods to an organization to sell at a community rummage sale, individuals may be given a donation credit on their taxes, clean out their garages, and help the agency make much needed money. Funds that are raised in this manner are not paperwork intensive (in fact, other than writing up posters, there is none) and funds are not required to be spent on an identified program or project. Conclusion After reviewing the financial documents and ratios of XYZ Corporation, it is clear that they are making solid business decision in how their money is spent and how revenue is raised. Most calculations show that their situation has improved since the initial reports of 2002. If history is any indicator of what will follow in the future, they should be able to sustain their growth and perhaps even expand. They have increased the number of clients served while at the same time keeping their budget under control. The only area that really needs improvement is the revenue dependency aspect of their budget. Being too dependent on one funder can spell disaster for any organization. XYZ has made headway in this department by getting the majority of their funds from two agencies instead of just one, but it would serve them to continue to diversify their revenue sources. Hopefully, this corporation will continue to provide quality services to their clientele far into the future and continue to remain solvent. References Martin, L. (2001). Financial management for human service administrators. Needham Heights, MA: Allyn Bacon. How to cite Analyzing Financial Statements, Papers