How to Analyze NPO's Financial Statements for an Accounting Coursework?

Financial statement analysis is tough and, doing it in case of a NPO is tougher. Many students find this troublesome. This instigates them to wander here and there in need of coursework help. If you are also one of them, then we have a gift. Wondering what? Well, knowledge is the world's best gift and through this article, we will share the same. In the section below, you will find fruitful information on how to analyze the NPO's financial statements for the accounting coursework. Go through it carefully to ease your concern.

An Easy Way to Analyze an NPO's Financial Statements for the CourseworkAre you sitting with hands on head, thinking "I cannot accomplish this task of analyzing the NPO’s financial statements"? Well, leave the head and hold a pen in the hand. Why? Well, because now you will learn the best and easiest way to analyze these statements. We are sure, after going through the below-mentioned steps, you will gain the confidence to interpret them for the coursework. Here you go!

Step #1 Glance at the Income Statement

An income statement of an NPO is popularly known as the statement of affairs. This is a crucial financial document as it gives an idea of whether the income is sufficient to meet the obligations or not. Yes, NPOs also earn, but unlike the other organizations, they use these earnings to pay off the expenses and future growth, instead of distributing them as profits. While analyzing it, look for details like the ratio of total expenses to income. This ratio reveals whether the organization is efficiently managing its funds or not.

Step #2 Look at the Balance Sheet

After analyzing the statement of affairs, the next step is to analyze the balance sheet. The balance sheet shows whether the organization's assets are enough to pay off its liabilities or not. While interpreting it, keep the following points in mind:

1. An NPO should have more liquid assets.2. It should not have too much debt.3. Most of its assets should come by the way of donation, grant, or investment.

Step #3 Read the Cash Flow Statement

After the balance sheet’s analysis, the 3rd step is interpreting the cash flow statement. Have its careful reading to understand from where the NPO's earnings come from and how it spends them. While analyzing the cashflows, compute the ratio of overhead and salaries to direct program expenses.

Step #4 See the Management Discussion Section

The management analysis and discussion section is a place to find a secret treasure. Wondering why? Well, this is because here you will discover all the information which the earlier statements failed to provide. Some of the key details revealed by this segment include:

1. Reasons for poor financial performance
2. Expansion strategies of the organization

Step #5 Do the Ratio Analysis

Do you know which is the best way to interpret the financial statements? Well, it is computing the various accounting ratios. They will help you judge the organization's performance, compare it with the previous year, and competitors easily. Following are a few ratios, you need to calculate:

1. Cash flow coverage ratio
2. Net asset turnover ratio
3. Income to expense ratio

Have you started scrutinizing the NPO's financial statements? Well, wait for a little, go through the above-mentioned steps again, and practice implementing them. Remember, more practice means accurate analysis in the coursework. Lastly, we are taking your leave, with the wish that may you have an amazing coursework writing experience.

Summary: Analysis of an NPO's financial statements is daunting, therefore, this article provides you the much-needed Accounting Coursework Help by sharing some easy-breezy steps to do it.

The author is a former accountancy professor and an academic writer associated with Assignment Desk. She likes to read and research new topics in her free time.