Question

Compare the financial performance of the two organizations and provide suggestions (based on the comparison) for the Walden Conservatory of Music, both from a financial and operational perspective. In MEMO format.

New England Conservatory of Music Based on 2017 Form 990

Liquid Funds Indicator = 4.25 months

Debt to Asset Ratio= 18.9%

Debt to NA ratio = 1.239

Program Service Ratio = 85.9%

Savings Indicator = 22.5%

Current Ratio = 5.36

Defensive Interval = 31.19

Liquid Funds Amount = No Long term liability

Return on Investment = 40.7%

Times Interest Earned Ratio = 22.2

Walden Conservatory of Music Based on 2017 From 990

Liquid Funds Indicator: 1.52 months

Debt to Asset Ratio: 18.3%

Debt to NA Ratio: 22

Program Service Ratio: 75.9%

Savings Indicator: 4.12%

Current Ratio: 2.34

Defensive Interval: 2.43

Liquid Funds Amount: $

Return on Investment: 6.9%

Times Interest Earned Ratio: 6.36

Answer 1

Financial performance Comparison on 2017 Form 990

	New England Conservatory of Music Based	Walden Conservatory of Music Based	Comparison
Liquid Funds Indicator	4.25 months	1.52 months	New England Conservatory can continue for 4.25 months before it exhausts its liquid assets, assuming that no additional cash flows into the organization.On the other hand,Walden Conservatory can continue for 1.52  months
Debt to Asset Ratio	18.9%	18.3%	This ratio is an indicator of a company's financial leverage.A lower ratio shows that a stable company with a lower proportion of debt and a higher ratio means that a higher percentage of the assets can be claimed by the company's creditors.Therefore,Walden Conservatory has a better ratio than New England Conservatory.
Debt to NA Ratio	1.239	22	This ratio compares an individual’s monthly debt payment to his or her monthly gross income.Therefore,New England Conservatory has a better ratio than Walden Conservatory .
Program Service Ratio	85.9%	75.9%	This ratio shows us the relationship between program expenses and the organization's total expenses.
Savings Indicator	22.5%	4.12%	It is a simple way to analyse if an organization is adding to or using up its net asset base and values greater than one indicate an increase in savings.Therefore,New England Conservatory has a better ratio than Walden Conservatory
Current Ratio	5.36	2.34	Current ratio tells us that the company's ability to pay short-term obligations or those due within one year.High current ratio shows that the company is more likely to pay its creditor back.Therefore,New England Conservatory has a better ratio than Walden Conservatory
Defensive Interval	31.19	2.43	This ratio tells us the number of days a company can operate without having access to non-current assets. Therefore,New England Conservatory has a better ratio than Walden Conservatory
Liquid Funds Amount	No Long term liability	$	Liquid Funds amount means that money that you invest in debt instruments and money market instruments has a tenure of up to 90 days.Here, they don't have any liquid funds amounts with them.
Return on Investment	40.7%	6.9%	A high ROI means that the firm is successful at using the investment to generate high returns.Therefore, New England Conservatory has a better ratio than Walden Conservatory.
Times Interest Earned Ratio	22.2	6.36	With reference to the Times Interest Earned Ratio, higher times interest earned ratio is favorable because it shows that the company presents less of a risk to investors and creditors in terms of solvency.