14-10. Lafayette Film Center (LFC) is a not-for-profit theater that presents independent films. In addition to revenue from theater admissions, LFC relies on concession and caf sales, grants and other external support, theater rental sales, and proceeds from special events and other programs that not only promote appreciation for independent films, but also generate grants and contributions. LFCs new executive director has asked you, as the director of finance, to provide an analysis of the organizations financial position.

Refer to Exhibits 14-7 through 14-10; these exhibits present LFCs statements of financial position, statements of activities, analysis of expenses by nature and function, and statements of cash flows for the years ended December 31, 2024 and 2023.

1. Does LFC have an endowment? How do you know?
2. How much of LFCs net assets with donor restrictions were reclassified as unrestricted in 2024? Where can this be found in the statements of financial position and statements of activities?
3. Calculate the four profitability ratios presented in the chapter for LFC for 2024 and 2023 as well as the percent change in each from 2023 to 2024. By which measure did LFCs profitability deteriorate the most, and by how much?
4. LFCs total expenses grew by over 100 percent from 2023 to 2024, while its total revenue and other support declined by over 50 percent. Look at the theaters statements of activities to answer a and b: A. Excluding interest/investment income and the one-time sale of tax credits, which three revenue or support categories declined by over 50 percent from 2023 to 2024? B. Which expense category grew by over 100 percent?
5. Calculate LFCs program services ratio for 2024 and 2023 as well as the percent change in each from 2023 to 2024. Is LFCs program services ratio for 2024 higher than the commonly accepted benchmark?

6. Given your answers to questions 4 and 5, would you recommend that LFC reallocate some of its spending from program services to fundraising in 2025? Why or why not?

7. What was LFCs depreciation expense in 2023 and 2024? Which financial statement(s) provide this information?

8. Now that receivables constitute a much larger proportion of LFCs assets than in the past, the executive director has asked you to calculate the receivables turnover ratio and average collection period for 2024. A. Which revenue items will you exclude from the ratio? Why? B. What is LFCs receivables turnover ratio and average collection period for 2024? Are they favorable or unfavorable? Why? C. Would you recommend recalculating the receivables turnover ratio using the average of beginning-of-year and end-of-year receivables in the denominator? Why or why not?

Lafayette Film Center Statements of Cash Flows for the Years Ended December 31, 2024 and 2023

2024 2023

Operating Activities

Change in net assets $(680,212) $ 4,129,254

Adjustments to reconcile change in net assets to net cash provided by (used in) operating activities:

Depreciation 624,356 107,900

Contributions restricted for building renovations 1,843,396

(Increase) decrease in operating assets

Grants receivable (424,838) 292,666

Other receivables 1,452 (33,344)

Conditional promises to give 224,016 (16,818)

Prepaid expenses (11,552)

Inventory 9,108 (59,510)

Deposits 6,400 (1,510)

Increase (decrease) in operating liabilities

Accounts payable (5,026) (423,404)

Accrued expenses (2,732) 111,776

Deferred revenue 31,186

Net cash provided by (used in) operating activities $(227,842) $ 5,950,406

Investing Activities

Payments for property and equipment $(682,412) $(7,159,362)

Net cash/(used in) investing activities $(682,412) $(7,159,362)

Financing Activities

Payments on capital leases $ (49,336) $ (10,084)

Net increase in line of credit 860,510 100,000

Net cash provided by financing activities $ 811,17 $ 89,916

Net increase/(decrease) in cash and cash equivalents $ (99,080) $(1,119,040)

Cash and cash equivalentsbeginning of year 174,662 1,293,702

Cash and cash equivalentsend of year $ 75,582 $ 174,662

9. Calculate the quick ratio and debt to equity ratio for LFC for 2024 and 2023 as well as the percent change in each from 2023 to 2024. Are these trends favorable or unfavorable? Which presents the greater area of concern in 2024, and why?

10. Given your answers to the questions above and an overall review of LFCs financial statements, would you characterize LFCs financial position as weak, neutral, or strong? Why?

Lafayette Film Center Statements of Financial Position as of December 31, 2024 and 2023 \begin{tabular}{|l|l|l|} \hline Assets & 2024 & 2023 \\ \hline \end{tabular} Current Assets \begin{tabular}{|c|c|c|} \hline Cash and cash equivalents & $75,582 & $174,662 \\ \hline Grants receivable & 562,696 & 137,858 \\ \hline Inventory & 50,400 & 59,508 \\ \hline Other receivables & 36,172 & 37,624 \\ \hline Prepaid expenses & 11,552 & - \\ \hline Total Current Assets & $736,402 & $409,652 \\ \hline \multicolumn{3}{|l|}{ Long-Term Assets } \\ \hline Conditional promises to give & $264,514 & $488,530 \\ \hline Deposits & 1,510 & 7,910 \\ \hline Property and equipment, net & 9,336,672 & 9,278,616 \\ \hline Total Long-Term Assets & $9,602,696 & $9,775,056 \\ \hline \end{tabular} \begin{tabular}{|l|l|l|} \hline Total Assets & $10,339,098 & $10,184,708 \\ \hline \end{tabular} Liabilities and Net Assets Current Liabilities \begin{tabular}{|l|l|l|} \hline Accounts payable & $108,214 & $113,240 \\ \hline Accrued expenses & 109,044 & 111,776 \\ \hline Deferred revenue & 31,186 & - \\ \hline Line of credit & 960,510 & 100,000 \\ \hline Current portion of capital lease obligations & $1,100 & 48,394 \\ \hline Total Current Liabilities & $1,260,054 & $373,410 \\ \hline \end{tabular} Long-Term Liabilities: \begin{tabular}{|l|l|l|} \hline Capital lease obligations less current portion & 36,596 & 88,638 \\ \hline Total Liabilities & $1,296,650 & $462,048 \\ \hline \end{tabular} Net assets: \begin{tabular}{|l|l|l|} \hline Without Donor Restrictions & $8,777,934 & $9,184,130 \\ \hline With Donor Restrictions & 264,514 & 538,530 \\ \hline \end{tabular} The accompanying notes are an integral part of these statements. Lafayette Film Center Statements of Activities for the Years Ended December 31, 2024 and 2023 \begin{tabular}{|c|c|c|} \hline & \multicolumn{2}{|c|}{ Without Donor Restrictions } \\ \hline & 2024 & 2023 \\ \hline \multicolumn{3}{|l|}{ Revenue and Support } \\ \hline Theater admissions & $414,818 & $78,640 \\ \hline Concession and caf sales & 1,522,426 & 196,288 \\ \hline Memberships & 139,684 & 61,350 \\ \hline Theater rental sales & 68,180 & 58,414 \\ \hline Special events & 47,710 & 140,616 \\ \hline Other programs & 62,006 & 45,726 \\ \hline Interest and investment income & - & 56,656 \\ \hline Sale of tax credits & - & 1,384,002 \\ \hline Grants & 1,061,762 & 3,016,550 \\ \hline \end{tabular} \begin{tabular}{|c|c|c|} \hline Contributions & 360,104 & 1,129,112 \\ \hline Total Revenue and Support & $3,676,690 & $6,167,354 \\ \hline Net assets released from restrictions & 274,016 & 1,826,578 \\ \hline Total Revenue and Other Support & $3,950,706 & $7,993,932 \\ \hline \multicolumn{3}{|l|}{ Expenses } \\ \hline Program services & $3,640,634 & $1,378,472 \\ \hline General administration & 455,436 & 407,244 \\ \hline Fund raising & 260,832 & 302,384 \\ \hline Total Expenses & $4,356,902 & $2,088,100 \\ \hline Change in Net Assets & $(406,196) & $5,905,832 \\ \hline Net assets_-beginning of year & 9,184,130 & 3,278,298 \\ \hline Net assets_end of year & $8,777,934 & $9,184,130 \\ \hline \end{tabular} The accompanying notes are an integral part of these statements. Lafayette Film Center Statement of Functional Expenses for the Years Ended December 31, 2024 and 2023 \begin{tabular}{|c|c|c|c|c|c|c|c|c|} \hline & \multicolumn{2}{|c|}{ Program Services } & \multicolumn{2}{|c|}{GeneralAdministration} & \multicolumn{2}{|c|}{ Fundraising } & \multicolumn{2}{|l|}{ TOTAL } \\ \hline & 2024 & 2023 & 2024 & 2023 & 2024 & 2023 & 2024 & 2023 \\ \hline Expenses:Salariesandwages & $1,388,176 & $644,896 & $215,536 & $197,140 & $73,028 & $45,474 & $1,676,740 & $887,510 \\ \hline Employeebenefits & 59,826 & 22,178 & 9,290 & 15,428 & 3,148 & - & 72,264 & 37,606 \\ \hline Payroll taxes & 146,382 & 70,190 & 22,724 & 21,448 & 7,680 & 4,948 & 176,786 & 96,586 \\ \hline Contractedlaborandservices & 15,100 & 64,640 & 42,980 & 38,872 & 94,430 & 98,868 & 152,510 & 202,380 \\ \hline Insurance & 69,940 & 30,372 & 17,810 & 11,828 & 3,192 & 2,220 & 90,942 & 44,420 \\ \hline Equipmentandmaintenance & 108,682 & 23,272 & 362 & 12,130 & - & - & 109,044 & 35,402 \\ \hline Supplies & 100,236 & 45,832 & 26,658 & 29,586 & 4,696 & 2,858 & 131,590 & 78,276 \\ \hline Printingmaterials & 23,426 & 6,550 & 40 & 5,546 & 12,488 & 17,790 & 35,954 & 29,886 \\ \hline \end{tabular} \begin{tabular}{|c|c|c|c|c|c|c|c|c|} \hline Meetingandtravel & 10,788 & 19,840 & 7,496 & 19,538 & 2,120 & 8,642 & 20,404 & 48,020 \\ \hline Interest & 59,410 & 17,292 & 19,442 & 11,154 & - & 8 & 78,852 & 28,454 \\ \hline Specialevents & - & - & - & - & 37,900 & 104,958 & 37,900 & 104,958 \\ \hline Costofgoodssold & 793,120 & 137,540 & - & - & - & - & 793,120 & 137,540 \\ \hline Occupancy & 135,196 & 68,636 & 25,350 & 20,684 & 8,448 & 4,702 & 168,994 & 94,022 \\ \hline Membershipdues & 620 & 1,528 & 2,304 & 792 & 532 & 5,692 & 3,456 & 8,012 \\ \hline Computerexpenses & 22,150 & 8,128 & 1,818 & 1,546 & - & 196 & 23,968 & 9,870 \\ \hline Postageandhandling & 7,366 & 1,784 & 17,956 & 4,050 & 824 & 3,584 & 26,146 & 9,418 \\ \hline Uniforms & 2,896 & 2,322 & - & - & - & 286 & 2,896 & 2,608 \\ \hline Licensesandpermits & 2,536 & 4,540 & 272 & 900 & - & - & 2,808 & 5,440 \\ \hline Subscriptions & 148 & 1,634 & 424 & 492 & 140 & 210 & 712 & 2,336 \\ \hline \end{tabular} \begin{tabular}{|l|l|l|l|l|l|l|l|l|} \hline Marketing & 91,016 & 39,942 & - & - & - & - & 91,016 & 39,942 \\ \hline Programming & 33,340 & 73,046 & - & - & - & - & 33,340 & 73,046 \\ \hline Depreciation & 570,280 & 94,310 & 42,390 & 11,642 & 11,686 & 1,948 & 624,356 & 107,900 \\ \hline Other & - & - & 2,584 & 4,468 & 520 & - & 3,104 & 4,468 \\ \hline TotalExpenses & \begin{tabular}{l} $,640,634 \\ \hline \end{tabular} & $1,378,472 & $455,436 & $407,244 & $260,832 & $302,384 & $4,356,902 & $2,088,100 \\ \hline \end{tabular}