Scenario 1

The performance indicators I will look at here are:

• Program expense efficiency (are the costs associated with meeting our goals appropriate compared to total expenses?)
  • This is measured as: Program Expenses/ Total Expenses. Having a higher value for this ratio is considered healthy as it demonstrates that we are spending more on our actual programs compared to administrative expenses.
• Liquidity (can we pay our current debts?)
  • This is measured as: current assets/current liabilities. Having a higher value, especially greater than 1, demonstrates that we have enough liquid assets to cover our immediate debts.
• Fund-raising efficiency (are our fund-raising costs appropriate for the amount of funds we raise?)
  • This is measured as: fund-raising expenses/public support. Ideally, we would want to make the most out of each fund-raising dollar we spend, and we wouldn't want to spend too much on funs-raising compared to what we actually raise.

Using these three indicators, we would generally need to be as efficient as possible with the money we spend, making cost-saving decisions as needed. Running donor campaigns is a good way we could increase our liquidity, especially in the short-term. However, we would want to make sure that we run these campaigns as efficiently as possible.

Scenario 2

In managing Rocket's Refuge, it's essential to monitor key performance indicators that reflect both financial sustainability and alignment to our mission. The three primary performance indicators I'm examining are: Program Expense Efficiency, Fundraising Efficiency, and Liquidity. These indicators help assess how effectively my animal rescue delivers services to animals, how efficiently it raises funds, and whether we can meet short-term financial obligations when they arise.

To measure these indicators, I've selected three key financial ratios:

1. Program Expense Efficiency Ratio: Formula = Program Expenses/Total Expenses

This ratio shows the proportion of total expenses spent directly on mission-related services, such as veterinary care, shelter maintenance, and adoption programs. A higher ratio is considered healthy and demonstrates that our organization is prioritizing its core mission over administrative or fundraising costs.

1. Fundraising Efficiency Ratio: Formula = Fundraising Expenses/Public Support

This ratio measures how effectively Rocket's Refuge raises money. Since Rocket's Refuge will rely heavily on public donations and fundraising events, it's critical that fundraising dollars produce strong returns. A poor ratio could point to the need for more cost-effective methods.

1. Liquidity: Formula = Current Assets/Current Liabilities

This ratio measures Rocket's Refuge's ability to pay our short-term obligations using our current assets. For an animal rescue organization like ours that might face urgent medical expenses or seasonal intake spikes, having sufficient liquidity ensures smooth operations and the ability to respond quickly to emergencies.

Key Decisions Based on the Ratios

Each of these financial ratios offers valuable insight into the health of Rocket's Refuge and by routinely tracking and responding to them, we can make informed decisions that support both immediate needs and long-term impact. If the Program Efficiency Ratio is low, we may need to reassess spending priorities and redirect more resources to direct services. If Fundraising Efficiency is poor, it may signal the need to shift strategies, perhaps from costly in-person events to lower-cost online giving campaigns. And if Liquidity is below 1.0, we should consider cost-cutting or building a short-term emergency fund.

Based on scenarios 1 & 2 please answer the below respectfully critique scenario 1 & 2 rationale for the three most important key ratios for their performance indicators. What other ratios/performance indicators should your peer consider and why? Support your position, citing the text. Note: you must submit your initial post before you can see your peer's posts.