ACCOUNTING ANALYSIS 8
Running head: ACCOUNTING ANALYSIS 1
Accounting analysis
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American Civil Liberties Union Foundation financial analysis
Financial analysis is a fundamental pillar for making financial decisions. An organization can determine how the operations should run to maximize in profit making. Moreover, there are nonprofit organizations that do not depend much on profit making but rather their services. In my analysis, I have decided on the American Civil Liberties Union Foundation (ACLU), a non-profitable company. The organizations ranking among the top ten non-profitable organizations in America. The stated mission of the organization is to defend and preserve the individual liberties and rights which are guaranteed by the constitution of the United States of America. Some liberal and conservative organizations have supported the organization in its mission. The annual budget of the organization is over one hundred million dollars annually. The work of the organization through litigation and lobbying makes the union have over 1.2 million members who are committed to the freedom in the bill of right (Donohue, 2017)
Although in some rare cases, these liberties which support the mission of ACLU like free speech equality due process and the privacy ensuring to every native, they are never entirely secure. Governments and principal parts can without much of a stretch debilitate them or even remove them. The ACLU has had huge achievement battling such cases: vast numbers of the most critical Supreme Court choices have been won with its association and keeps on fighting a considerable amount of claims in state and government courts every year. The ACLU additionally anterooms administrators and stands upon a wide assortment of traditional freedoms and social liberties issues (Donohue, 2017). Its energetic dedication to these worries makes it exceedingly questionable.
The organization has various uses of its categories of money funds when it gets its funds. On an annual basis, the American Civil Liberties Union and the ACLU Foundation file with the Internal Revenue Service. These forms include both financial data and relevant information about each organization’s mission, governance, management, and programs. The organization reported receiving about $105 million in grants and contributions out of its $138 million budget, so the recent surge in donations represents a potential 35 percent increase in the ACLU’s coffers. The ACLU will spend another $21 million on legal counselors and staff at its central station in New York, in addition to $5 million on the framework, workplaces, and tasks. This amount is basing on the gift of stock funds (Loughran & McDonald, 2016). The union again decides to use the union yet, will burn through $13 million to manufacture a grassroots part activation program and would like to outperform the extent of the NRA, which is as of now twice as vast the money for equity funds. The two potential areas of interest for the organization by the shareholders are financial position and financial situation of the union ( Weinrib, 2018).
The statement of cash flows of the ACLU organization depends on cash inflow and cash outflow.T he operation activities are one of the cash inflow revenue generating activities which invest on or financings like current assets and current liabilities. The company provides both direct presentation and a lengthy presentation. Secondly, is the investing activities which are cash inflow from the acquisition and disposal of the long term assets of the company and other investments which are not in cash equivalent. The last cash inflow is the financing activities from the changes in the size and composition of the contribution of equity capital or the borrowing of the entity (Weinrib, 2018). Depreciation expenses reduce the profit of the company but bring no impact on cash flow. The company also gets cash from free cash inflow. The GAAP uses details, complexities, and legalities of business and corporate accounting. The Financial Accounting Standards Board (FASB) uses GAAP as the foundation for its comprehensive set of approved accounting methods and practices.
Additionally, cash outflow determined by the ACLU organization current liabilities and expenses. The company has to take care of these aspects every financial year to be able to find net income. ACLU has to take into account current liabilities divided into long term and short term liabilities. Long term liabilities due to be repaid over more than one accounting period and the short term liabilities to be paid off in one accounting period. Expenses among them being employee salaries are cash outflows. The organization has to pay for this expenditure to ensure the smooth running of the business. ACLU keeps a close monitor on this as seen in the financial statement of 2018-2017.
Vows receivable can be a point of contention between the bookkeeping office and the advancement or raising money group. Bookkeeping rules enable an association to perceive income from receivable, otherwise called a guarantee to give, on the date of the dedication, if it is unqualified. Naturally, the advancement group might want to have however many benefactor responsibilities as could reasonably be expected to qualify as a guarantee to give. Given this motivating force, a successful bookkeeping office must have controls set up to help manage the advancement office to guarantee just substantial duties recorded on the books. From the viewpoint of the advancement office, the bookkeeping office’s direction implies the improvement group will get the chance to check fewer than 100% of what they need as vows receivable. In this way, it is officeholder on the bookkeeping office to clarify in full their job as a watchman. Here are some key focuses worth imparting to the improvement group: The union gets a lot of funds from different sources, but government funds are the only utilized fund in the ACLU. (Loughran & McDonald, 2016).
The ratio analysis of a non-profit organization is more complex than that for a profit-oriented company. While the dire effect of misuse of underperformance of a profit-oriented company is subsequent losses and eventual closure, nonprofit making organizations face punishment from the financiers and sponsors if the funds used for the core activities. The use of financial ratios well illustrated the fiscal conditions of the selected organization utilizing and interpreting financial indicators for the ACLU organization. Financial ratios are relationships determined from a company’s financial information and used for comparison purposes. These ratios are:
Leverage ratio: The ratio is an indicator of the extent to which the organization can service its debts using shareholder’s funds. In the case of ACLU and other non-profit making company, the leverage ratio is calculated using the formula below;
unrestricted net assets total liabilities= 355759792137175336= 2.59
The translation of this is that the organization is in a sound financial position. For every dollar that the shareholders contribute, the company owes 2.59.
Fundraising ratio. The ratio measures the cost of raising funds. It is the ratio between the fundraising expenses against the total expenses of the company. It is calculated by:
Fundraising expensesTotal expenses
As of 2018 fiscal year, the fundraising ratio of the company was:
13640733233791812*100 = 5.8 %
Contribution and Grant ratio: The ratio shows the extent to which an organization depends on voluntary support. It’s an expression as the revenue percentage of the total contributions and grants. In the case of ACLU. The contribution and grant ration can be calculated using the formula:
Contributions + grants Revenue
831889191687990= 49.2
This means that ACLU relies 49 times on grants and contributions as opposed to the profits. Such as reflection expected for a nonprofit making company. Other ratios are significant for the performance of the organization elucidated below.
Current ratio: Current Assets/Current Liabilities— this is measuring the ability of an entity to pay its near-term obligations. “Current” usually is defined as within one year of the company.
Debt to equity ratio: Debt/Owners’ Equity— these indicate the relative mix of the company’s investor-supplied capital. A company is generally considered safer if it has a low debt to equity ratio—that is, a higher proportion of owner-supplied capital—though a meager rate can indicate excessive caution
Annual inventory turnover: Cost of Goods Sold for the Year/Average Inventory—shows how efficiently the company is managing its production, warehousing, and distribution of the price product, considering its volume of sales.
Although they may appear to be threatening at first, the majority of the previously mentioned monetary proportions can be determined by just contrasting numbers that show up on a little business’ salary explanation and asset report. Entrepreneurs served by acquainting themselves with proportions and their uses as a GPS beacon for envisioning changes in tasks. Money related proportions can be an essential instrument for entrepreneurs and directors to gauge their advancement toward achieving organizational objectives, just as toward rivaling bigger organizations. Proportion examination, when performed consistently after some time, can likewise enable private ventures to perceive and adjust to patterns influencing their activities. Comprehending monetary proportions is one of the major proportions of an organization’s prosperity from brokers, financial specialists, and business examiners. Regularly, a private venture’s capacity to get obligation or value financing will depend on the organization’s budgetary proportions (Weinrib, 2018).
References
Donohue, W. A. (2017). The Politics of the American Civil Liberties Union. Routledge.
https://www.aclu.org/files/pdfs/about/ACLU_Inc_18_FS_Final_Cover.pdf
Loughran, T., & McDonald, B. (2016). Textual analysis in accounting and finance: A survey. Journal of Accounting Research, 54(4), 1187-1230.
Weinrib, L. (2018). Untangling the Radical Roots of America’s Civil Liberties Settlement: Causation, Compromise, and the Taming of Free Speech. Jerusalem Review of Legal Studies, 18(1), 135-158.