Financial Ratios: An Overview

Days of Cash on Hand is measured as the organization's cash plus savings divided by total spending less depreciation, all multiplied by 365.
It is a measure of the organization's ability to sustain operations with existing cash, to meet current liabilities without having to borrow to finance these liabilities.

The Inverse Current Ratio is current liabilities divided by current assets
It is a measure of the resources needed to be paid in cash or delivered in services in the next 12 months against liabilities over the 12-month period.

The Surplus Margin Ratio is the surplus (or deficit) divided by total revenue.
It is simply a measure of profitability. A surplus margin ratio of less than zero indicates that expenses exceed revenues, and a surplus margin ratio of greater than zero indicates that revenues exceed expenses.

Leverage is defined as total liabilities divided by total assets.
It measures the degree to which an organization relies on debt rather than its own resources--known as net assets--to fund its assets.

The asset growth ratio represents the percentage change in total assets from one year to the next.
Increases /(decreases) in assets are often coupled with similar changes in the surplus margin ratio.

(Cash + Marketable Securities + Receivables)/ Average Monthly Expenses
Reflects how many months the organization could operate if no additional funds were received.

(Total Net Assets - Restricted Net Assets - Fixed Assets) / Average Monthly Expenses
The liquid funds indicator is similar to the defensive interval in its use but is more conservative in removing assets with restrictions on them from the calculation. It also determines the number of months of expenses that can be covered by existing assets.

(Revenue - Expense)/ Total Expense
The savings indicator measures the increase or decrease in the ability of an organization to add to its net assets. Values greater than one indicate an increase in savings. The savings indicator is a simple way to determine if an organization is adding to or using up its net asset base.

Average Total Debt/ Average Total Assets
Measures the proportion of assets provided by debt. High values indicate future liquidity problems or reduced capacity for future borrowing.

Revenue from Contributions and Grants as a % of Total Revenue
The contributions and grants ratio measures the composition of organization funds coming from these sources. Organizations can use this indicator to determine long and short-term trends in line with strategic funding goals that can change the organizational revenue composition in this area.

Revenue from Government Grants/ Total Revenue
The government grants ratio measures the composition of organization funds coming from government sources. Similar to the contributions and grants ratio, organizations can use this ratio to determine long and short-term trends and tie strategic goals to changing the organizational revenue composition in this area

Earned revenue from program services/ Total Revenue
The program service ratio measures the composition of organization funds coming from earned revenue from both private and government sources derived from the delivery of services. Similar to the other revenue ratios, organizations can use this ratio to determine long and short-term trends and tie strategic goals to changing the organizational revenue composition in this area

These indicators show the distribution of revenues by source, including private contributions (individuals, foundations and business), earned operating income from services (services for hospital patients, human service clients, theater tickets, etc.), government grants