As much as you might prefer to concentrate on only your
not-for-profit's mission, strong financial health is vital to
pursuing those goals. Financial statements provide essential
information on your fiscal footing. However, you can expand
everyone's understanding of your organization's performance
and sustainability by monitoring a variety of ratios.
Reasons to "ratio-nalize"
While financial statements will always play an important role,
they are not necessarily the best way to communicate performance to
stakeholders. Ratios grab information from your financial
statements and can be presented as easy-to-process snapshots.
Ratios also help stakeholders keep an eye on overall financial
condition, identify worrisome and promising trends, and make
informed decisions. Among other things, they can provide a picture
of your organization's current financial standing, its adequacy
and use of resources, and its reliance on certain types of funding.
Ratios also are an
