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.
No comments:
Post a Comment