Financial Review of the Salvation Army

The Salvation Army is one of the premier non-profit organizations in the world.  They are a Christian organization with the motto “Doing The Most Good.”  The Salvation Army has outreach programs across the United States and throughout the world.  While the Salvation Army is best known for the red collection kettles during the holiday season, their fundraising efforts stretch throughout the year and provides programs for a variety of causes.  Professionals in the field of social work often make thousands of referrals to the Salvation Army each year. The balance sheet for the Salvation Army shows a strong organization with solid financial backing. 

One quick measurement to determine the financial health of the organization is to use the current ratio.  The current ratio divides the current assets by the current liabilities and shows the ability of a company to pay off their debts if the notes came due.  For the Salvation Army, the current ratio is 1:1.34.  An ideal number for the quick ratio is 1:2 which would mean that the organization would have twice as many assets as liabilities.  In this case, the Salvation Army does have more assets than liabilities but does not meet the 1:2 standard.

Another measurement to study the strength of the organization is the quick ratio.  The quick ratio is the (current assets – inventory)/total liabilities.  For the Salvation Army, the quick ratio is 1:1.30.  This means that for every dollar of liability (including monies spent for operating exposure), the organization has $1.30 in assets to cover the liability.  The Salvation Army has a strong financial position by this standard measurement.

Predicting revenues for a non-profit organization is a challenging proposition.  In addition, a non-profit organization that is financially strong can be a double-edged sword and can lead to the perception that not all the available monies are funding the organization’s guiding principles. In this case, the Salvation Army balance sheet shows a well-balanced organization that will continue its good work for years to come.

Reference

The Salvation Army Annual Report. (n.d.). Retrieved 9/23/2013 from Salvation Army website http://www.salvationarmyusa.org/usn/www_usn_2.nsf/0/3F80BF21D8F61B7F8525743D0064057B?Opendocument