Question

review the financial statements of the march of dimes for 2013 as presented in table 12-8. comment as you can (even in the absence of guidelines as to what constitutes norms for comparable foundations) on the fiscal strength of the organization as of Dec. 21, 2013 with respect to: liquidity, burden of debt relative to assets, adequacy of available resources to meet expenditures, current fiscal performance as indicated by surpluses or deficits and riskiness of revenue stream

Answer 1

Answer : Comments with respect to ,

1) Liquidity - it measures the ease at which a business can meet its immediate and short-term financial obligations (usually due within the next 12 months).

• These obligations typically include the use of cash to make payments for expenses, repayment of loans, purchase of assets (equipment, vehicles, machinery) or distribution of profits and dividends.
• So a business is said to have good liquidity when it has cash, together with assets that can easily be converted to cash, that total significantly more than the immediate and short-term financial obligations of the business.
• As a general rule, a business is said to have good liquidity if for every $1 of immediate and short term financial obligation (current liabilities) it has at least $2 of cash and assets that can be easily converted to cash (current assets).

2) Burden of debt relative to asset , It is the ratio between the organization debt in comparison to organization total assets. The higher the burden of debt,it increases the financial cost , hence decrease in profitability. The organization must ensure the lower debt liability to increase the organization profitability.

3) Adequacy of available resources to meet expenditures , It means if organization must have enough available resources so as to generate positive revenue so it can bear all the operational and administration and financial cost related to product. The organization should properly manage and utilize the asset and available resource so as to optimize stakeholder wealth.

4) Current fiscal performance as indicated by surpluses or deficits - Financial performance is a subjective measure of how well a firm can use assets from its primary mode of business and generate revenues. If current fiscal performance indicates surplus then we can say the organization assets are being managed and controlled effectively. In contrary part, if current fiscal performance indicates deficits, it means the profitability is negative. Hence, the organization should form policies that will change the operational method and process and will be cost effective in a manner that will increase the profitability of the organization and negative result will be no more.

5) Riskiness of revenue stream is the another performance measurement indicator that shows the factors that can affect the profitability of the organization and can hit the revenue negatively. The organization should study and analyze each and every factor that affect the revenue stream negatively and make the policy so it will guide the management of the organization to tackle the hard situation.

While reviewing financial statement, the business analyze profitability ratio to evaluate organization performance in the current operational scenario. The relevant decision should be implemented if any standard does not match with the organization performance.