The Tree of Money

The Tree of Money

Columbia Association's (CA) balance sheet for the periods ending April 30, 2016 though 2019. The April 30, 2020 financial statement will be available to the public this summer. Balance sheets represent a snap shot of the financial health of the organization versus the Income Statement that is similar to a video of the twelve month activities of the organization. The focus of this article will be an explanation of the financial trends in its balance sheet and Statement of Cash Flows. Only publicly available information will be used in this article. The table below is in thousands of dollars.

FY April 30,	2016	2017	2018	2019
Cash	702	1,845	68	72
Total Current Assets	14,300	10,826	4,919	4,750
Property, Plant, and Equipment	115,006	117,690	130,293	135,600
Total Assets	139,169	138,544	145,496	150,809
Line of Credit	0	1,845	5,905	11,001
Current Liabilities	25,519	21,391	25,901	29,258
Long Term Liabilities	27,640	26,041	24,225	22,345
Total Liabilities	53,159	47,432	50,126	51,603
Net Assets	86,010	91,112	95,370	99,206
Total Liabilities and Net Assets	139,169	138,544	145,496	150,809

Stakeholders utilize balance sheets to determine the liquidity of the entity. The ratios below have been calculated from publicly available financial data on CA's website. 

FY April 30,	2016	2017	2018	2019
Quick Ratio	0.0275:1	0.0863:1	0.0026:1	0.0034:1
Current Ratio	0.56:1	0.51:1	0.19:1	0.16:1

Accounting liquidity measures the ease which an entity can meet its financial obligations with its cash or near-cash assets and pay its debts or bills as they become due. There are two financial ratios, the quick ratio and current ratio, calculated above. They differ as to how they define "liquid assets." The current ratio includes all current assets against current liabilities. The Quick Ratio includes only cash and cash equivalents against current liabilities. Most businesses strive to have a current ratio of at least 1:1 to be considered liquid. CA's current ratio is less than 1:1, and has been trending downward since 2016. This data should be analyzed with CA's cash flow statement to provide stakeholders with a 360 degree view of CA's financial management. The table below is a summary of the Statement of Cash Flows from CA's financial statements available on its website. All numbers are stated in 000's.

FY April 30,	2016	2017	2018	2019
Increase in Unrestricted Net  Assets (Net Income)	4,461	5,102	4,258	3,836
Cash Generated From  Operating Activities	13,129	15,345	18,103	14,246
Long Term Debt (Repayment)	(1,567)	(1,629)	(1,690)	(1,753)
Capital Projects	(9,955)	(12,281)	(23,774)	(17,533)
Cash(Repayment)Borrowing  on Line of Credit	(922)	(307)	5,905	5,096
Line of Credit Balance	307	-	5,905	11,001

The above summary of the cash flow of CA reflects a generous amount of cash generated from operations. However, CA did not use this cash flow to strengthen its financial position by setting up cash reserves or funds for use in an emergency situation. Instead, CA used the funds for an expansion in Sports and Fitness capital projects. There was little to no increase in revenue, no Increase in Net Unrestricted Assets (Net Income), and no measurable return on investment. 

Restructuring the line of credit to a term loan would improve the liquidity of the Association, but a cultural shift must occur to bring the continued reliance on lines of credit and not planning for a rainy day by funding cash escrow accounts to an end.