Question

provide suggestions (based on the comparison) for the Walden Conservatory of Music, both from a financial and operational perspective. In essay format.

New England Conservatory of Music (NEC) Based on 2017 Form 990 Ratios

Liquid Funds Indicator = 4.25 months

Debt to Asset Ratio= 18.9%

Debt to NA ratio = 123.9%

Program Service Ratio = 85.9%

Savings Indicator = 22.5%

Current Ratio = 3.45

Defensive Interval = 3.24

Liquid Funds Amount = ($111,359,654)

Return on Investment = 4.94%

Times Interest Earned Ratio = 22.2

Walden Conservatory of Music Based on 2017 Form 990 Ratios

Liquid Funds Indicator: 1.52 months  

Debt to Asset Ratio: 18.3%

Debt to NA Ratio: 22%

Program Service Ratio: 75.9%

Savings Indicator: 4.12%

Current Ratio: 2.34

Defensive Interval: 2.43

Liquid Funds Amount: ($580,418)

Return on Investment: 6.9%

Times Interest Earned Ratio: 6.36

Answer 1

Ratio analysis plays a vital role when comparing two companies based on different ratios and the decisions can be formed accordingly based on the ratio

So here we are going to compare the data provided in the year 2017 between Walden and New England

• Liquid fund indicator: it means investors usually suggest to invest for 3-6 months to park money for short term needs. So, the higher the ratio the better is the liquidity. Here the main impact is to repay the amount or make the money easily available for the repayment of petty expenses without reselling the inventories. so hereby, the New England is preferred over Walden
• Debt to Assets Ration: Debt to assets ratio explains the financial leverage aspects. It is calculated by dividing the total assets with the creditor's amount so it's always good to maintain a low debt to asset ratio than a higher ratio. In this ratio, Walden prevails over New England.
• Debt to NA ratio means it is the total of assets, liabilities and shareholders equity too. so always the ratio equal or less is much preferred when compared to a higher one because the assets should always prevail the debt if not the company will be in loss. In this ratio, Walden prevails over New England.
• Program service ratio: It is the division of the program expenses and the overall expenses of the organization. the higher the program service ration the higher the rating will be provided to the company in a whole so hereby, the New England is preferred over Walden
• Savings Indicator: The amount of savings that a company is adding up to its net total assets value. If the company adds up higher values then it is doing well if not the other way round. All the values greater than one indicate a positive impact on the organization as a whole. so hereby, the New England is preferred over Walden
• Current ratio: the current ratio is the difference between current assets and current liabilities. it is a liquidity ratio that is calculated only based on one year. it explains about the maximization of the repayment of the debts for that period so hereby, the New England is preferred over Walden
• Defensive interval: It explains how a company can run its business without holding any or having any access to non-current assets. it compares assets to liabilities instead of comparing them with expenses. The higher the defensive interval the best in the company doing.  so hereby, the New England is preferred over Walden
• Liquid fund amount: The amounts which are invested for the short term basis the higher the liquid funds the easier the availability of amount but the negative value here shows that the return on such liquid funds aren't available at a near date so the Walden prevails over New England.
• Return on Investment: The amount which has been given to us for investing the amount it is like a profit or loss the higher the ROI the profitable we are. as the Walden ROI is high the company investments have prevailed over New England.
• Times interest earned ratio: it is calculated by dividing the earnings before interest and taxes with total interest expenses. explaining how the company can meet the interest expenses on its debt. Higher times earned ratio is better when compared with low ratio because it gives a good impression to creditors and their repayment status even at times of insolvency. so hereby, the New England is preferred over Walden

Overall, New England ratios prevail for such period when compared to Walden ratio in most of the analysis