Case Study #3 Financial Statement Review

(Instructions)

For Assignment #3, we will be using the financial statement that is located on the Internet for the not for profit organization named Youth Without Shelter (YWS). The not for profit charity is located in the greater Toronto area. The financial statement is located on their public website (yws.on.ca) under the heading who we are and then Financials. I have also attached the financial statements to the assignment that are public knowledge and accessible to the general public. Note, in addition, I also contacted YWS to advise that the financial statements that are on their public website will be used as our assignment and they consented.

Answer the 10 questions that I have listed. Note, the questions that are listed are totally hypothetical and do not represent the organization in any actual manner. Please ensure to show all calculations if the question requires them for the answer. Before you answer the questions, review the financial statement in its entirety to ensure you have an understanding of the financial information.

(Questions)

1. Explain what is the purpose of the Independent Auditors Report that is located at the beginning of the financial statement.
2. The organization is setting up a new program that will operate for 3 months. The total cash funds of $180,000 from the government to operate the program are to be provided evenly to YWS in months 2 & 3. The expenses of $180,000 are allocated evenly over the 3 months. For any months the program has a cash shortfall, the shortfall will be covered by YWS until the funds have arrived from the government that will be on the 1^st business day of the month. Prepare a 3-month cash budget for this new program. Explain how you would manage the finances for this 3-month program.
3. Identify the cash or access to cash available to the organization and explain if the amount of cash is sufficient for the needs of this organization.
4. YWS is considering the purchase of equipment for $100,000 to fund a program that will provide the following cash inflows: Year 1 - $25,000, Year 2 - $40,000, and Year 3 - $50,000. Calculate the payback period? How do you know when the payback period is reasonable?
5. Identify and explain 2 strengths and 2 weaknesses with respect to the operations of this not for profit as you review the financial statement for YWS.
6. Answer the following short answer questions:

1. The date of the most recent financial year-end and the number of months it covers.
2. Calculate the working capital and explain if the level is sufficient for this charity.
3. Original cost of Building Improvements.
4. The NBV of furniture & fixtures.
5. The largest source of revenue in 2020.
6. Why are prepaid expenses listed as an asset item in the financial statement?

7. The city of Toronto has stated that next year funding will be reduced by $600,000. Explain the strategies that you would recommend for this organization to deal with this revenue reduction.
8. YWS in Fiscal 2020 had a deficiency of revenues over expenses, how is it then possible for their cash holdings to increase from fiscal 2019 to 2020 as seen in the current assets.
9. Who is the long-term forgivable loan owed to and is the loan/debt secured, and if so, what is the security for the debt. Explain why a lender/bank would want security.
10. The organization is looking to purchase computer equipment for $90,000. Assume the organization made the purchase on Day 1 of the fiscal year; calculate the annual depreciation given it will be amortized over the estimated useful life on a straight-line basis. The expected terminal/ending value is zero. Explain if depreciation reduces the organizations cash flow.