Nonprofit leaders seeking to understand the organization’s financial situation usually start by reviewing the financial reports. As a next step, analysis of reports can deepen understanding and identify strengths and weaknesses in financial condition. Financial ratios are an established tool for businesses and nonprofits. This tool provides calculation of 14 ratios, including a mix of balance sheet and income statement ratios. Individual nonprofits must decide for themselves which calculations are meaningful and what benchmarks will be useful for their situation and goals. Refer to the resource Analyzing Financial Information Using Ratios for complete descriptions and definitions.
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