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British Heart Foundation is a UK charity whose vision is “a world in which people do not die prematurely or suffer from heart disease”.

1. You will need to provide an analysis of the financial and non-financial performance of British Heart Foundation (BHF) using BHF’s annual reports of recent years. Relevant financial ratios must be used in your financial analysis. In the non-financial analysis, you need to evaluate the sustainability performance of BHF using relevant Key Performance Indicators (KPIs). Whereever information about both the BHF group and BHF charity is provided, information regarding the group should be used.

2. Someone argues that a non-profit organisation will never achieve all three sustainability areas since they are not working toward earning profit, which is one of the three areas. To what extent do you agree or disagree with that statement? Support your answers with the relevant literature.

Financial Performance Analysis

The non-profit companies is centered on attaining a special mission as well as balancing cost efficiency with program efficiency that can facilitate in realizing the most suitable social returns. “British Heart Foundation (BHF)” is positioned as a UK based charity whose vision is to maintain a world within which people does not face pre-mature death or suffer from severe ear disease (Altman, Iwanicz-Drozdowska, Laitinen and Suvas 2015). Without following traditional profit earning conducts they compete for funding dollars and government grants that ensure they attains resources to serve their community. The objective of this essay is to provide an evaluation of the financial and non-financial performance of “British Heart Foundation (BHF)” through analyzing the annual reports of the company of the recent years. Financial ratios will be evaluated for analyzing the financial performance and the non-financial analysis of the company sustainability of BHF will be analyzed through employing Key Performance Indicators (KPI’s) (Alvarez 2015).

The BHF has attained increased growth in its income to £158.9m for the financial year of 2017 that is evidenced with the growth in legacy income. The income has indicated a positive increase that is depicted through observing that total income for the company in the year 2016 was £156.6m (Block and Landgraf 2016). The company has also observed exceptional growth in its business being a non-profitable organization that is signified as more than 724 shops all through UL generated around £25.1 million as profit through gathering, sorting and selling more than 65,000 tons of healthcare goods each year. BHF has expanded its healthcare operations through supporting more than 3700 healthcare professionals caring for those suffering from heart disease and circulatory health issues. Through attaining a steady business growth, this non-profit organization is attaining ability to invest more than 102.7 million pounds within life-saving medical research (Coluzzi, Ferrando and Martinez-Carrascal 2015). BHF also continued to offer considerable breakthroughs that have facilitated the company in changing lives of people all through the world. All the shops of BHF in UK attained more than 29.1 million pounds through gathering and selling 66 ton of heart care goods. In addition, people visits in its online stores have also increased through observing that more than 60 million people visited BHF that resulted in 19 million sales and 160000 items sold through its online eBay store. Moreover, there has also been more than 40% in the number of health care professionals that is supported by BHF (Coluzzi and Martinez-Carrascal 2015). The total number of patient visits has gradually increased that has facilitated the non-profit organization to expand its healthcare program that can encourage people to join healthcare at work.

Profitability Ratios:-

Particulars

British Heart Foundation

2016

2017

Gross margin

79.63%

83.07%

Net margin

4.60%

-3.96%

Return on capital employed

2.12%

-1.66%

Non-financial Performance Analysis

The profitability ratios of BHF indicated that the gross margin of the company increased in the year 2017 from the year 2016. This is because of the reason that the company is highly profitable in selling its inventory or the merchandise (Gao, Dong, Ni and Fu 2016). Moreover, the net margin and return on capital employed of the company is observed to get decreased over the years from 2016 to 2017. This is because of the reason that the company is not able to sell most of its assets in generating desirable revenue. A decreasing trend of net margin signifies that an organization is not that effective in converting sales into real profit. The capital employed by the company is getting less gradually to enhance its operating profit. It also signifies that the dollar of profits is decreased for the overall capital employed (Hakoum et al. 2016).

Liquidity Ratios:-

Particulars

British Heart Foundation

2016

2017

Current ratio

-1.35

-1.37

Quick ratio

-1.31

-1.33

The liquidity ratio analysis of BHF indicates that the current as well as the quick ratio of the company is going to a decreasing trend from the year 2016 to year 2017. This is for the reason that the company’s capability to pay all its short term debts is getting affected (Henderson, Jarvis, Clayton, Pocock and Fox 2015). The decreased quick ratio of this non-profit organization indicates that it is facing difficulties in selling inventory or prepaid assets in case of an emergency. Moreover, a decreased current ratio of the company indicates that it is not that efficient to pay all its sort term obligation. BHF is dealing with issues of getting paid on their receivables and is having high inventory turnover within their balance sheet.

Asset Efficiency Ratios:-

Particulars

British Heart Foundation

2016

2017

Average total assets

        190.80

        212.75

The average total assets of BHF Company are observed to increase in the year 2017 in comparison to the year 2016. This is because of the reason that the company is positioning itself to be effective in using its assets in a better manner to generate sales (Teng 2014). The higher this ratio, the more favorable is the profitable position of the company. BHF is using its assets or charity turnover to produce services related with heart care. This ratio offers the investors and the creditors a clear idea regarding managing and using assets and services. Moreover, the company is also be used as an indicator that can provide increased profitability. An increased average total asset indicates an increased asset-intensity of the organization.

Gearing Ratios:-

Particulars

Details

British Heart Foundation

2016

2017

Debt-to-equity ratio

A/B

1.19

1.23

Interest cover ratio

C/D

4.24

-3.71

The gearing ratios for BHF Company can focus on indicating the proportion of organizations borrowing funds in comparison to its equity. This ratio signifies the financial risk to which a business is focused on as an increased debt might that can result in increased financial difficulties. The gearing ratios of the BHF Company indicate that the debt-to-equity ratio of the company has increased over the years from 2016 to 2017. This is because of the reason that the company’s debt is observed to decrease over the years also indicates that the non-profit organization has been involved in aggressive financing conducts in maintaining its growth with debt.

The interest cover ratio has decreased over the years from 2016 to 2017 and this because of the reason that the company is not that able to pay its interest expense for the same period. The results gathered from this ratio signify that the non-profit organization has insufficient ability to all its interest payments for its debt in a timely way (Theriou 2015). BHF is not making enough money to pay all its interest expenses and on the current debt. It also indicates the financial strength along with efficiency of the using the assets or offering exceptional heart care services to all the target patents through charity.

Sustainability Performance Analysis using KPIs

The sustainability performance of BHF group is analyzed through evaluating its Key Performance Indicators (KPI) and its strategic partnerships that is linked with attaining company’s long term objectives. The senior management team has the responsibility to monitor a range of KPI’s that the organization has attained for tracking organizational progress. The strategy of the company in reporting key performance indicators focuses on monitoring the patient outcomes at a local programmed level is not devoid of its challenges. In measuring its performance, this non-profit organization ensures that the corporate responsibility programs require recruiting an increased proportion of eligible female patients (Block and Landgraf 2016). In addition, to ensure sustainability success of the company heart failure patients are is observed as a major priority for BHF Group. Another key performance indicator for the company is the node of delivery of corporate responsibility that must be wider than certain group based initiatives. The qualitative information for the key performance indicators of BHF is gathered from the employee surveys. Performance of the company is measured through analyzing whether the non-profit organization’s financial and human resources are aligned in suitable manner with the strategic risk mitigation strategies. The total number of patient visits has gradually increased that has facilitated the non-profit organization to expand its healthcare program that can encourage people to join healthcare at work.

The company follows that factor and internal analysis developed five major measures of charity performance that includes financial measures, consumer satisfaction, and effectiveness of the management, benchmarking and stakeholder performance. Certain other key performance indicators that facilitates in measuring the extent of success and sustainability of the company are indicated below:

  • Total raised amount
  • Average donation with total amount raised and number of donors
  • Number of visitors
  • Analyzing the number of visitors those enjoyed the event organized by the company
  • Analyzing charity performance through observing increasing participant involvement in heart care programs

Success is also measured by BHF Group through ensuring the quality and frequency of patient assessment before and after providing exceptional heart disease care must improve. The key performance indicators include three factors such as conversation, engagement and the number of substitutes (Block and Landgraf 2016). Increased consumer visibility is measured through evacuating the indicators such as share rate on social media such as Twitter, Facebook, Instagram and Facebook. Engagement is increased among the patients is measured through analyzing the amount of likes, followers and views. Success of its heart care campaigns is measured through increase in the number of subscribers within the event organized by BHF. Moreover, a considerable difference exit to the extent by which patients are evaluated both the pre and post corporate responsibility. The KPI’s attained by these non-profit organizations are indicated below:

  • The company tracks medical research applications along with awards, public awareness along with access to BHF resources
  • The number of healthcare professionals funded, employee turnover along with traditional financial performance are also tracked by BHF
  • Very low direct competition and huge prospect market
  • Increased media attention surrounded by issues dealt by BHF
  • Another success factor is ensured by the non-profit organization through integration of fundraising pages with the help of fitness tracking apps along with increasingly personalized stewardship journey this facilitated to deliver.
  • The company also uses real time personalization that has ensured increased engagement across all of the stewardship emails

Conclusion

Conclusion

The objective of this essay was to provide an evaluation of the financial and non-financial performance of “British Heart Foundation (BHF)” through analyzing the annual reports of the company of the recent years. It was gathered from the essay that a decreasing trend of net margin signifies that an organization is not that effective in converting sales into real profit. The capital employed by the company is getting less gradually to enhance its operating profit. The results gathered from this ratio signify that the non-profit organization has insufficient ability to make all its interest payments for its debt in a timely way. The decreased quick ratio of this non-profit organization indicates that it is facing difficulties in selling inventory or prepaid assets in case of an emergency. The total number of patient visits has gradually increased that has facilitated the non-profit organization to expand its healthcare program that can encourage people to join healthcare at work.

2. It is stated that the non-profit organizations are not that capable to attain three major sustainability areas as they are not working towards attaining profit that is one of the three areas. Focused on this statement, Jalava, Joensen and Pellas (2015) indicated that there are three major areas on which sustainability reports are focused. This includes planet, people and profit that facilitate most of the organizations in maintaining its sustainable position within the marketplace. These researchers also stated that the nonprofit organizations are deemed to contribute to the creation of social value. In contrast, Johnson et al. (2017) revealed that the nonprofit organizations differ in sustainability in comparison to the non-profit counterparts in different significant manner. This is for the reason that profits intend to generate increased shareholder value by ensuring delivery of increased consumer value. The non-profit companies must strive for financial resources for offering social value to all its consumers. They deal with a highly complex and challenging multi-stakeholder involvement and strategic process. Liang, Lu, Tsai and Shih (2016) indicated that these organizations attempt to maintain their levels of sustainability specially the profit aspect through focusing on “balancing mission and money” as a major concern in managing the non-profit companies. Theoretical models and empirical comparisons consider certain variables such as pricing, quantity and quality of production, enhanced services quality and budgeting practices. This is maintained by most non-profit companies in maintaining fiscal sustainability.

Sauaia (2014) argues that a ”earned income conducts” has no place for review within the nonprofit literature and considers that sustainability within the non-profit sector is attaining the capability to deal with the requirements of the society in a way that sufficiently addresses internal and external challenges. These researchers also indicated that despite funding several challenges, the social service non-profit sector is capable to generate a considerable income portion from the revenue generating conducts like membership fees, consulting fees and fee-for-service. Schmukler and Abraham (2017) added that the international and national movements are joining together in supporting the allocation action for enhancing sustainability within the non-profit sector and for making sure that the community needs are addressed adequately. These researchers also explained that collecting donations serves as a process of funding that also questions cost verses benefit and also most of the respondents rely on the same as top funding source. Simon et al. (2015) explain that the profitability of NGOs decreasing social impact on their list of priority for focusing on self-sustaining revenues and these organizations do not cover its costs from the profitable ventures.

References

Altman, E.I., Iwanicz-Drozdowska, M., Laitinen, E.K. and Suvas, A., 2015. Financial and non-financial variables as long-horizon predictors of bankruptcy.

Alvarez, I., 2015. Financialization, non-financial corporations and income inequality: the case of France. Socio-Economic Review, 13(3), pp.449-475.

Block, J.H. and Landgraf, A., 2016. Transition from part-time entrepreneurship to full-time entrepreneurship: the role of financial and non-financial motives. International entrepreneurship and management journal, 12(1), pp.259-282.

Coluzzi, C., Ferrando, A. and Martinez-Carrascal, C., 2015. Financing obstacles and growth: an analysis for euro area non-financial firms. The European Journal of Finance, 21(10-11), pp.773-790.

Coluzzi, C., and Martinez-Carrascal, C., 2015. Financing obstacles and growth: an analysis for euro area non-financial firms. The European Journal of Finance, 21(10-11), pp.773-790.

Gao, F., Dong, Y., Ni, C. and Fu, R., 2016. Determinants and economic consequences of non-financial disclosure quality. European Accounting Review, 25(2), pp.287-317.

Hakoum, M.B., Anouti, S., Al-Gibbawi, M., Abou-Jaoude, E.A., Hasbani, D.J., Lopes, L.C., Agarwal, A., Guyatt, G. and Akl, E.A., 2016. Reporting of financial and non-financial conflicts of interest by authors of systematic reviews: a methodological survey. BMJ open, 6(8), p.e011997.

Henderson, R.A., Jarvis, C., Clayton, T., Pocock, S.J. and Fox, K.A., 2015. 10-year mortality outcome of a routine invasive strategy versus a selective invasive strategy in non–ST-segment elevation acute coronary syndrome: the British Heart Foundation RITA-3 Randomized Trial. Journal of the American College of Cardiology, 66(5), pp.511-520.

Jalava, N., Joensen, J.S. and Pellas, E., 2015. Grades and rank: Impacts of non-financial incentives on test performance. Journal of Economic Behavior & Organization, 115, pp.161-196.

Johnson, O., Muhoza, C., Osano, P., Senyagwa, J. and Kartha, S., 2017. Catalysing investment in sustainable energy infrastructure in Africa: Overcoming financial and non-financial constraints.

Liang, D., Lu, C.C., Tsai, C.F. and Shih, G.A., 2016. Financial ratios and corporate governance indicators in bankruptcy prediction: A comprehensive study. European Journal of Operational Research, 252(2), pp.561-572.

Sauaia, A.C.A., 2014, March. Evaluation of performance in business games: financial and non financial approaches. In Developments in Business Simulation and Experiential Learning: Proceedings of the Annual ABSEL conference (Vol. 28).

Schmukler, S.L. and Abraham, F., 2017. Financial Globalization.

Simon, A., Bartle, C., Stockport, G., Smith, B., Klobas, J.E. and Sohal, A., 2015. Business leaders’ views on the importance of strategic and dynamic capabilities for successful financial and non-financial business performance. International Journal of Productivity and Performance Management, 64(7), pp.908-931.

Teng, H.S.S., 2014. Qualitative productivity analysis: does a non-financial measurement model exist?. International Journal of Productivity and Performance Management, 63(2), pp.250-256.

Theriou, N.G., 2015. Strategic Management Process and the Importance of Structured Formality, Financial and Non-Financial Information. European Research Studies, 18(2), p.3.

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