1. Understanding Financial Statements
Review of basic financial statements
Tips for reading financial statements
Financial statement examples:
Pilgrim Services Society
SanJo University

2. Non-profit Financial Statements with different presentations
Non-profit Model Pilgrim Services Society
Educational Institution Model SanJo University

3. ADDITIONAL FINANCIAL ANALYSIS TIPS FOR READING FINANCIAL STATEMENTS

4. Liquidity and Solvency
Liquidity indicates the ability to meet cash needs
Current assets and current liabilities
Cash Flow Statement (how cash needs were met)
Solvency indicates the ability to stay in business
Net assets and overall balance sheet position
Statement of Activities (“are they profitable”)
Both Liquidity and Solvency are required for “going concerns”

5. Financial Analysis 101 – Questions to Ask
Balance Sheet:
Did total assets, liabilities and net assets increase or decrease?
Did current assets and current liabilities increase or decrease – which accounts caused the biggest changes? (especially if current liabilities are greater than current assets)
Are there any major changes in cash, debt, receivables or payables?
What are the major components of net assets (unrestricted, temp restricted or permanent) – any accumulated deficits?
Statement of Activity
What are the net changes in net assets (also called excess of revenues over expenses etc) – this tells you the overall profitability
What were the major components of revenue and expense and where are the major changes (especially those in excess of 5%) from the prior year?
Are there major changes in restricted funds?

6. Financial Analysis 101 – Questions to Ask
Statement of Cash Flows:
Did cash increase or decrease significantly from the prior year?
What caused the increase/decrease – cash flows from operations, investing or financing activities (major categories)?
If cash flow from operations is negative – how did they meet their cash needs – by selling investments or incurring debt?
Did they make major fixed asset additions – how did they fund those acquisitions – from debt or from other sources?
Notes to Financial Statements:
Provides more detail on investments, fixed assets, debt, pledges and restricted funds
Look for potential cash flow issues based on schedule of when pledges are due and when debt payments are required
What other liabilities are disclosed in the footnotes – pension, operating leases?
Are there major contingencies disclosed in the footnotes?

7. Remember the Three’s Three basic financials:
Statement of Financial Position
Statement of Activities
Statement of Cash Flows
Three categories of Net Assets:
Permanently Restricted
Temporarily Restricted
Unrestricted

11. Remember the Three’s Statement of Activities (Income Statement)
Statement of Activities Explains
Unrestricted
Temporarily Restricted
Permanently Restricted

14. Remember the Three’s Cash Flow Statement
Cash Flows from:
Operating Activities
Investing Activities
Financing Activities

15. ACCRUAL BASIS
CASH BASIS

16. Importance of Footnotes
Notes to Financial Statements add critical data and insight:
Detail on financial statement components – investments, fixed assets, debt
Highlight financial matters not included in the numbers – uncertainties, contingencies, estimates
Audited financial statements are required to contain such disclosures