Utilize Table 1 and Table 2 to answerquestions 1to 4.

1. Illuminations Inc. consultants have prepared a list of financial ratios (numbers) for your analyses. The following table presents these ratios into four categories: a) liquidity, b) solvency, d) profitability, or d) efficiency. Use the following formula to perform the ratio calculations from 2014 to 2018 using Microsoft Excel

Liquidity Ratio
Current Ratio	=(Cash+Marketable Securities+Receivables+Inventory)/(Accounts Payables+Grants Payables+Deferred Revenues)	Ratio indicates whether the organization has sufficient current assets to meet its short-term obligations.
Defensive Interval	=(Cash+Marketable Securities+Receivables)/[(Expenses-Depreciation)/12]	Ratio indicates the number of months the organization could operate using cash, marketable securities, and receivables on hand at year-end.
Liquid Funds Amount	=Unrestricted Net Assets-Fixed Asset+Long-Term Debt	Ratio indicates the amount of unrestricted liquidity remaining after fixed assets and related debt are removed.
Liquid Funds Indicator	=[(Total Net Assets-Permanently Restricted Net Assets-Fixed Assets)*12]/Total Expenses	Ratio indicates the number of months that an organization can operate based on net assets (reserves) that do not include fixed assets or endowments.
Quick Ratio	=(Cash+Marketable Securities+Receivables)/(Accounts Payables+Grants Payables+Deferred Revenues)	Ratio indicates whether the organization has sufficient liquid current assets to meet its short-term obligations. It is a more stringent measure than the current ratio.
Solvency Ratio
Debt to Asset Ratio	=Total Liabilities/Total Assets	Ratio indicates the extent to which the organizations assets are financed with debt
Debt to Net Asset Ratio	=Total Liabilities/Total Unrestricted Net Assets	Ratio indicates the percentage of unrestricted net assets that are being financed with debt.
Times Interest Earned Ratio	=(Increases or Decreases in Net Assets+Interest Expenses)/Interest Expenses	Ratio indicates whether the organization has sufficient net assets to pay the current years interest expenses.
Profitability Ratio
Return on Investment[1]	=Investment Income/Average Investments	Ratio indicates the gain or loss generated on an investment relative to the amount of money invested.
Savings Indicator	=(Revenues-Expenses)/Revenues	Ratio is the income (loss) as a percentage of total revenue. Positive ratio indicates income and negative ratio indicates loss.
Efficiency Ratio
Administration Expense Ratio	=(Administration Expenses/Total Expenses)	Ratio indicates the percentage of total expenses that cover administrative expenses.
Program Service Ratio	=Program Service Expenses/Total Expenses	Ratio indicates the percentage of total expenses that go directly into program services.

[1]. The Return on Investment ratio may be incomplete because unrealized gains andlosses are excluded from the statement of activities. We thank an anonymous reviewer for this clarification.

Table 1Statement of Financial Position Data for Walden Conservatory of Music, Inc. (Based on Form 990s)

	2014	2015	2016	2017	2018
Assets Current Assets
Cash & Equivalent (Investible Assets)	$101,352	$117,716	$43,354	$60,578	$69,705
Accounts Receivable	$37,346	$46,383	$46,596	$119,529	$56,558
Pledges & Grants Receivable	$113,850	$233,147	$356,642	$261,600	$523,734
Inventories for Sale or Use	$0	$8,274	$0	$0
Noncurrent Assets
Investment/Securities	$654,050	$761,395	$793,003	$829,564	$833,327
Fixed Assets	$3,549,845	$3,420,787	$3,298,415	$3,171,353	$3,037,204
Other	$11,178	$11,315	$26,139	$17,640	$16,050
Total Assets	$4,467,621	$4,599,017	$4,564,149	$4,460,264	$4,536,578
Liabilities Current Liabilities
Accounts Payable	$26,352	$28,374	$25,732	$29,049	$18,779
Deferred Revenue	$135,126	$130,459	$138,765	$160,018	$188,765
Long-Term Liabilities Loans and Notes	$400,000	$505,000	$540,000	$625,000	$595,000
Total Liabilities	$561,478	$663,833	$704,497	$814,067	$802,544
Net Assets
With Donor Restrictions - Temporary in Nature	$269,217	$408,909	$522,254	$435,127	$651,146
With Donor Restrictions - Permanent in Nature	$654,551	$708,392	$750,347	$770,291	$814,779
Without Donor Restrictions	$2,982,375	$2,817,883	$2,587,051	$2,440,779	$2,268,109
Total Net Assets	$3,906,143	$3,935,184	$3,859,652	$3,646,197	$3,734,034
Total Liabilities and Net Assets	$4,467,621	$4,599,017	$4,564,149	$4,460,264	$4,536,578

Note: The ending net assets will not equal the beginning net assets plus the year surplus/deficit due to items not included in the statement of activities of the form 990 (ex: unrealized gains and losses on investments). Table 2Statement of Activities Data for Walden Conservatory of Music, Inc. (Based on Form 990s)

Table 2Statement of Activities Data for Walden Conservatory of Music, Inc. (Based on Form 990s)

Revenue	2014	2015	2016	2017	2018
Contributions	$901,399	$786,478	$550,828	$870,619	611,244
Program Services	$1,524,579	$1,442,949	$1,551,586	$1,509,723	1,523,123
Investments	$23,927	$43,637	$30,496	$53,847	69,650
Other	$79,582	$0	$0	$0	0
Total Revenue	$2,529,487	$2,273,064	$2,132,910	$2,434,189	$2,204,017
Expenses
Program Services	$1,976,119	$1,739,145	$1,851,467	$1,772,564	1,768,271
Administration	$365,667	$383,248	$404,445	$425,680	462,667
Fundraising/Other	$180,988	$240,237	$125,940	$135,722	183,734
Total Expenses	$2,522,774	$2,362,630	$2,381,852	$2,333,966	$2,414,672
Increase (or Decrease) in Net Assets	$6,713	($89,566)	($248,942)	$100,223	($210,655)
Note: Some important functional expenses are included below.
Functional Expenses	2014	2015	2016	2017	2018
Interest Expense	$15,470	$19,441	$18,013	$18,698	$18,672
Depreciation Expense	$165,447	$146,021	$146,187	$148,870	$143,123

2. Analyze WCMs financial performance using the ratios in each of the four classifications that you have calculated in question 1. For each ratio, is WCM doing better, the same, or worse from 2014 to 2018?