Analyzing Financial Information Using Ratios

This tool provides the description and calculation of 14 ratios, including a mix of balance sheet and income statement ratios. (Individual nonprofits must decide for themselves which calculations are valuable.) Once familiar with these ratios, you can use the worksheet to get started. Hosted by Propel Nonprofits.

“Nonprofit leaders seeking to understand their organization’s financial situation usually start by reviewing the financial reports. Understanding the financial information is the building block of any financial discussion. Beyond understanding the reports, much can be learned from analysis of the information and interpretation of what it is telling you. The basic analysis includes comparing financial reports to a benchmark such as the budget or the financial report from the previous year. One essential question is: does this information match our expectations?

“For a more technical financial analysis, ratios can be used to deepen understanding and interpretation. Financial ratios are an established tool for businesses and nonprofits. While there are dozens of ratios that can be calculated, most nonprofits can use a handful of them to learn more about their financial condition. This document provides a description and calculation of fourteen ratios, including a mix of income statement and balance sheet ratios.”

List of Ratios

Income Ratios

• Reliance ratio
• Reliance on government funding
• Earned income ratio
• Self-sufficiency ratio

Expense and Management Ratios

• Personnel cost ratio
• Benefit cost ratio
• Admin cost ratio
• Fundraising efficiency
• Cost per “unit” of service

Balance Sheet Ratios

• Current ratio
• Daily cash on hand
• Debt ratio
• Accounts receivable aging
• Accounts payable aging

Read the accompanying guide. Then download the worksheet.