5063 Nonprofit Reccomendation

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Jan 9, 2024

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1 American Redcross Sustainability Plan Trine University Corporate Finance 5063 Dr. Rob Shah April 25, 2023 American Redcross Sustainability Plan

2 The American Redcross is a nonprofit organization that focuses on providing emergency assistance to disaster relief in the united states. Upon looking at its financial statement, we can see that the organization has a total asset of $3.8 billion and a liability of $1,4 billion as of 2022. Upon looking at their largest composition of assets, it comes from investments of $1.5 billion. The American Redcross has $1,147,112 in Current assets and $526,790 in current liabilities. This essentially means that they have a current ratio of 2.18. This is a good indicator because a current ratio of 2:1 or higher usually means the nonprofit has enough assets to cover its short-term obligations. The nonprofit also has a debt of $483,789k and total assets of $ 3,872,182 this means that the nonprofit has a debt-to-asset ratio of 12%. For a nonprofit like the American Redcross, this seems reasonable because it is indicating that the organization is not relying on debt in order to run its day-to-day operations. Next, from looking at their income statement we can see that the American Redcross has revenue of $ 3.096 billion and expenses of $3.084 Billion for the year that resulted in an operating loss of $ 14.5 million for the year. Most of their revenue comes from contributions and grants and most of their expenses were related to their programs and service which is in line with what we would expect from a nonprofit. Next, we can generate the fundraising efficiency ratio from the total fundraising expense. We derive this from the amount received in contributions of $2,953,488 by the amount that the organization spent on fundraising of $324,325. This means that with a funding ratio of 17.85, they receive $17.85 for each dollar they spend on funding.

3 The final ratio would be the Savings Indicator Ratio which measures the ability of the organization to add to its net asset. The American Red Cross has $3,130,644 in revenue and $2,836,486 which means that they have a 0.104 saving indicator ratio. In a nonprofit, this means that they can save more money from their operations Based on the financial ratios mentioned above there is something that can be implemented further to increase the sustainability of the American Redcross. One of the things that can be done is by increasing their efforts in fundraising in their practices. This will increase the revenue that a nonprofit will have at their disposal which will essentially allow the organization to expand their outreach and programs. This can be done by expanding American Redcross’s donor outreach to more organizations, developing creative and engaging campaigns all around the United States, and leveraging AI and Social media in order to expand their reach. Another effort that can be used in order to increase the sustainability of the organization is by reducing expenses. This can be implemented by first identifying the areas of cost that are large and needs to be streamlined or cut down by the organization. An example of this would be the American Recross’ Biomedical service. By implementing certain practices or certain materials to be changed in their biomedical services, costs can be lowered and sustainability for the organization can be higher. The organization can also explore new partnerships or collaborations with established companies to reduce overhead costs, cut staffing down, and even renegotiate vendor prices. The third effort that can be done by the organization for its sustainability plan is to diversify its revenue stream. As of now, the American Red Cross receives its revenue from contributions from corporations, services of biomedical services, and program material and

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4 investment returns. By exploring new fundraising avenues and new corporation sponsorship, new grant funding from other organizations, or focusing their effort more on investments to receive more returns. The last point that can be introduced to increase sustainability is by optimizing their program delivery. This is done by only making the organization focus on programs that deliver impact to their mission while ensuring operational efficiency. Any other programs that do not align with the company’s vision or produce a significant impact should be assessed or terminated. By doing this the organization can really maximize the impact of their programs and increase their funding potential. Overall, the American Redcross company is doing well in terms of its operation to gain revenue and keep its long-term sustainability according to its financial statement. But there are some tweaks that can be done in the organization in the last four points mentioned to further increase the sustainability of the organization.