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The financial report

The financial report of this charity has a positive cash flow which can sustain the operations of the firm. The cash flow has improved from ? 1,263,000 to ? 1,395,000 in the years 2007 from 2006. The analysis of this change in the net funds of the organization is appealing for any creditor who wants to deal with the company because this is a positive movement in the cash flow. The firm has also showed improvement in total incoming resources which stood at ? 2,887,000 in the year 2007 as compared to ? 2,515,000 in the year 2006. They have also seen the increase in expenditure from ? 1,967,000 to ?

2,623,000 in year 2006 to year 2007. This is a negative change since the expense ha increased at a higher rate as compared to the income. If the expenses are not properly checked, they will contribute to the eminent collapse of the charity. Unlike a trading company where a higher expense can be financed by the owners’ contribution, this charity will not be able to get funding for the continual increase. Therefore, the trustee should check the charitable activities which increased drastically. The activities should be reduced so that they will be in line with the change in incoming resources.

There is also a negative change in the incoming investment gains which was from ? 2,172,000 in year 2006 to ? 611,000 in the year 2007. This shows that some of the investments were probably sold off for financing of some of the activities. This can be supported from the consolidated cash flow statement which shows investment worthy ? 2,343,000 were sold although there were purchases for the sale, the income from investments did not increase. There is also change in the current assets of the charity. It shows that in year 2007, the current assets for the group were ? 1,529,000, while in the year 2006, it was ?

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1,151,000. This means that the current assets decreased from the previous amount which is also a negative trend. The same is reflected in the current liabilities. Looking at the accounts, you note that current liabilities increased from ? 242,000 to ? 272,000 for years 2006 to year 2007. There is a danger of defaulting in paying current liabilities in future if the trend of the working capital reduction is kept. It can also be noted that there is positive change in net worth of the charity, i. e. total assets less liabilities from ? 18,558,000 to ? 19,512,000 in the year 2006 to year 2007.

This is a positive growth for the total assets. There is an improvement in the current ratio of the firm from times 4. 76 to times 5. 62. This means there is an accumulation of current assets which should be put into use and maintain times 2 ratio which is recommended for the similar firms. In my opinion looking at the current assets, total assets less liabilities, the firm has a positive outlook in terms of financial resources. Comparing these accounts with the accounts of other financial statements from other charities, you will find that this charity has a healthy financial statement.

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