Review the replies your peers made in Part 1. ( this is provided as a word document in the end, and has the area bolded and underlined) This was my partners answer, and I have to reply to it using the below:
Select a ratio proposed by one of your peers. Search for the information about a non-profit organization that would allow you to calculate the ratio (i.e., financial statements, fund raising info, etc.). Calculate the ratio as best you can.
Discuss what you see as their proposed ratio's pros and cons; and how their ratio might be improved.
There are numerous non-profit organizations focused on funding research for Children’s Cancer. One organization, in particular, is the St. Jude’s Children’s Research Hospital. This organization’s mission is to provide research on cancer prevention and treatment for children throughout the world. The organization does not bill the families of the children treated at the hospital and depends on public contributions for 75% of their operating costs (Financial Reports, 2015).
In order to provide financial analysis for St. Jude’s Children’s Research hospital, I am proposing a new ratio. I will call this ratio, the percentage of funds available for research and treatment. The formula to calculate the percentage is charitable donations plus funds received from charitable events divided by the organization’s operating expenses. Like for profit organizations, St. Jude’s has to provide financial statements that document where the money goes (Nickels, McHugh &McHugh, 2014). The operating expenses for this organization includes marketing expenses, salaries of employees, depreciation, insurance, hospital equipment, telephone bills, medicine and much more. My ratio calculates the percentage of money left over to fund cancer research, which essentially shows the overall financial health of the organization.
The ratio I have created allows businesses to the percentage of money available to provide the funding for research to help treat life-threatening cancers. An advantage, this ratio has compared to ratios conducted by for profit agencies is that St. Jude’s Research Hospital is tax exempt. This means that donations to the organization are tax deductible and the hospital does not have subtract taxes from its donations. Since St. Jude’s Children’s Research Hospital does not collect money from its patients, this helps maintain its tax exemption status. Throughout the United States, not for profit hospitals have been losing their tax exemption status. Many hospitals have been accused of operating like for profit organizations and have been charging their patients and even using aggressive tactics to collect funds (Schencker, 2015). In regards to the ratio cons, the ratio is actually quite complex. Marketing expenses, as general as it sounds is more than what was listed above. For instance, the marketing expenses include campaign materials, mailing costs, and printing and publication costs. The accountants working for St. Jude’s have numerous calculations to do in order to figure out its financial health. Another con is the fact that the ratio does not factor in the organization’s assets. The accountants working for St. Jude’s would have to do other calculations to figure out the liquidity of the organization.