Impact 100 - Finance 101 for Non-Profits Deck - Page 27

• Current Ratio = current assets / current liabilities
• Debt Ratio = total liabilities / total unrestricted net assets
• Defensive Interval or Days Cash on Hand = current asset / daily operational expenses

Common Financial Ratios and Targets

• Current Ratio = current assets / current liabilities

• Indicates an organization ’ s ability to pay obligations within 12 months
• Indicator of cash flow in the near future
• A ratio of 1:1 indicates the NP has exactly enough assets to pay off current liabilities
• Higher is better

• Debt Ratio = total liabilities / total unrestricted net assets

• Indicates how much an organization is relaying on funding from loans or other obligations
• How much you owe for each $ of asset
• High values indicate there could be future liquidly problems or reduced capacity for future borrowing
• Lower is better ( Impact 100 target is for this to be less than 0.30 )

• Defensive Interval or Days Cash on Hand = current asset / daily operational expenses

• A test of operation cash or adequacy of your reserve
• 3 months is a common goal