Introduction
Books for Africa, Inc., is a nonprofit organization whose primary purpose is donating books to various African countries’ libraries. The financial health of nonprofit organizations is assessed according to specific financial ratios, making evaluating their functional assets and resources possible. This essay will assess the parameters of a given company’s financial stability, and based on these data, the level of its financial health as a whole will be demonstrated.
Evaluation of Books for Africa’s Financial Health
The program efficiency ratio is used to assess an organization’s funds. This indicator is calculated as the ratio of program expenses to total expenses; for Books for Africa, Inc., it is 99.1% (Markwell & Lewis LLP, 2017). This indicator attracts attention because it reflects the high percentage of the organization’s funds spent on program implementation. Therefore, it can be judged that this organization is highly effective from the point of view of nonprofit organizations.
In addition to program efficiency, the provided report allows us to estimate the fundraising efficiency coefficient with sufficient accuracy. In this case, it is 160.0 (Markwell & Lewis LLP, 2017). This means the organization can raise approximately $160 in total contributions for every dollar spent on fundraising. This suggests that Books for Africa, Inc. is using its resources effectively to raise funds to support its mission.
Finally, the operating reserve can be roughly estimated since the annual operating expenses are not detailed in the financial report. Books for Africa, Inc. potentially has a good operating reserve ratio (Markwell & Lewis LLP, 2017). The unrestricted net assets and total expenses indicate that the organization has a financial cushion to cover a significant portion of its annual operating expenses.
Conclusion
Based on the report, Books for Africa, Inc. appears to have strong financial health. In addition, its financial performance indicators are quite stable and do not raise concerns that the organization cannot invest enough funds in its activities. Therefore, there is a high possibility that if it maintains high performance, the organization will succeed in its segment and attract new donors and sponsors.
References
Markwell&Lewis LLP. (2017). (rep.). Books For Africa, Inc. Audited Financial Statements (pp. 1–13). Minneapolis, Minnesota.