One of the Limitations of Financial Ratio Analysis for Not-For-Profit

question 6

True/False

One of the limitations of financial ratio analysis for not-for-profit organizations is that donors may incorrectly assume that there are federal or state laws that govern the percentage of annual revenues that a charity must spend on its programs.

---

Definitions:

Commercial Paper

Commercial Paper is an unsecured, short-term debt instrument issued by corporations, typically for the financing of operating expenses and meeting short-term liabilities.

Maturity

The date when a financial instrument (like a bond) expires and the principal is to be paid back to creditors.

Annual Interest Rate

The percentage increase in money lent or invested over a one-year period, expressed as a percentage of the principal.

Cash Conversion Cycle

A metric that measures the time between when a company pays for its inventory and when it receives cash from selling it.