Discuss about the Financial ratios in the assessment of financial performance of NGOs.
In the research, ethical standards are necessary to create an authentic research. The ethical codes of conduct are important in differentiating right actions from wrong. The ethical considerations are important so that the society can rely on the outcomes of the research. As the research is based on the secondary data, the researcher will ensure that all the data is collected from authentic and proper resources. The researcher will form proper inclusion and exclusion criteria so that all the research articles are authentic and relevant. The researcher will also assure that there is falsification, fabrication and misrepresentation of data. The researcher will also be considerate of the plagiarism issue in the research (Smith, 2015). In the research, it is important to give credibility to the authors for the work. It is important to respect the intellectual property rights of the fellow authors. The researcher will give proper credentials to contribution of other authors. The research outcomes will be used by other researchers; therefore, it is important that the data is authentic and does not use fabricated data. The researcher should also safeguard the collected information so that the disciplinary standards are maintained in the research (Flick, 2015). The researcher will maintain an objective stance in the research. It means that the researcher. The objective stance will be maintained in the research design, data analysis and interpretation of the data.
The research problem is the issue which shows the concern regarding the topic. This section will be able to describe the potential concern by which the literature review will be made. The research questions and hypothesis will be defined below which will give better understanding about the concept of the research topic. The following research questions will be addressed under this research:
- How can financial ratios be used in the assessment of financial performance of NGOs?
- How can trend analysis assist in the financial performance analysis of NGOs?
- What strategies can be used by the NGOs to enhance their financial performance?
- The uses of financial ratio or financial strategy enable organization of NGO to increase the financial performance.
- The uses of financial ratio or financial strategy do not enable organization of NGO to increase the financial performance.
Introduction to the research
There are many NGOs in Australia that use financial activities to increase the financial performance of the organization. The research under consideration aims at assessing if the charity and funds are being utilized properly or not so as to ensure the goals and principals of the organization. The two kind of financial analysis will be taken for this research in which ratio analysis and trend analysis covered. Child Fund Australia is chosen as the case organization. it is one of the independent and non-religious organization international development organization which has a purpose of decreasing the poverty among children in the developing countries. It has been found that the company is a member of the Child Fund Alliance. This organization is linked with 11 different organizations that contribute in developing the lives of children in collaboration with around 14 million children along with their families in more than 60 countries (Child Fund Australia, 2018). Child Fund Australia develops and execute programs in Myanmar, Vietnam, Timor-Leste, Laos and Papua New Guinea, along with that the supporting projects of it is provided the number odd services throughout Africa, Asia and America. The major work of it is funded by public donations, community and child sponsorship and government grants.
It is essential for it to manage its financial performance in an effective manner in the relation of the nature and the size of the operations that an organization performs. Financial performance should be evaluated by the NGOs like other organizations. There is a department of fianncial performance in NGOs that help in achieving the goals of the organziation in the terms of 'Surplus to Fund Employed' as well as 'Liquidity'. Moreover, the financial analysis helps out to ensure that the items linked with working capital are handled in an effective manner. financial stability os very improtant for this organziation as it has the major contributon in the well being of the society.
In the research, ethical standards are necessary to create an authentic research. The ethical codes of conduct are important in differentiating right actions from wrong. The ethical considerations are important so that the scientific society as well as society as a while can rely on the outcomes of the research. In this regard, the researcher will ensure that he will abide by all the ethical considerations of the research. As the research is based on the secondary data, the researcher will ensure that all the data is collected from authentic and proper resources. The researcher will form proper inclusion and exclusion criteria so that all the research articles are authentic and relevant. The researcher will also assure that there is falsification, fabrication and misrepresentation of data. The researcher will also be considerate of the plagiarism issue in the research (Smith, 2015). In the research, it is important to give credibility to the authors for the work. It is important to respect the intellectual property rights of the fellow authors. The researcher will give proper credentials to contribution of other authors. The research outcomes will be used by other researchers; therefore, it is important that the data is authentic and does not use fabricated data. The researcher should also safeguard the collected information so that the disciplinary standards are maintained in the research (Flick, 2015). The researcher will maintain an objective stance in the research. It means that the researcher. The objective stance will be maintained in the research design, data analysis and interpretation of the data.
According to Ngo, Mullineux and Ly, (2014), it is vital for the NGOs to follow the financial performance as it is vital for the organization to develop effective strategy to enhance the financial performance. The Objective of the research being done is to identify and asses if the charity which is being provided to the NGO through several channels around the globe is being used properly or to make sure the organizations are fulfilling their purpose. There are mainly two ways of assessing this information, the first being trend analysis (Where the result is compared to the previous periods or chunks of time ) and another one is known as ratio analysis ( Which calculates the ratio of the balance sheet and items of the income statement) . For this task the designated organization is the Child Fund Organization of Australia which is a completely non-religious and non-dependent worldwide organization which targets towards reducing the level of poverty amongst the children in countries which are not developed yet, or we can call them developing countries. This organization also has a participation in the Child Fund alliance which is a group containing 11 members that work together in order to bring up the standards of living for innumerable Children living in vulnerable circumstances. The number of children affected by the same is more than 14 million also their families are covered in the same campaign. This program is being run in more than 60 countries (Ngo, Mullineux and Ly, 2014).
The main aim of this research is to represent the research implications, research limitations, research findings and future direction. It is necessary for the organization to have the fundraising income for some components of the sectors regarding to the charities such as faith based organization, overseas aid and environmental organizations. It has been found that the in 2007 non-profit organization in fundraising accounted for $17.7 billion or 23%of revenue (Child Fund Australia, 2018). It has been analyzed that the regular sustainability and the growth of Child Australian Find is dependent in the huge part on the regular belief of donors and the huge public that charities normally can be trusted to use donations as promised to attain the aims of the specific cause in the benefits of public (Myšková and Hájek, 2017). Child Fund Australia has faith in a global community where numbers of children are safer and can get the chance to reach their full potential. The company has promoted the rights of children as elaborates in the United Nations Convention on the Rights of the child. Child Fund Australia gives a chance to sponsor to select the child by which the children get sponsorship. The sponsorship is combined with those of other sponsors in the same community so that entire children of the NGOs get benefitted (Barry and Tacneng, 2014). Corresponding facility is there in which the NGOs connect with the sponsor and tell them about the progress through letter cards and photos. This technique encourages other sponsor to change the lives of needy child.
The financial performance of the company is effective as it maintains the financial activities in a sophisticated manner. It has been found that the Child Fund Alliance is helpful that contributes more than 15 million children in 55 countries. They are supported by more than 55,000 sponsors in Australia alone (Pakira and Dutta, 2013). Child Fund Australia will comply with entire laws in countries where the company is operated. The policy and procedures of the company is more effective in which the financial management of the company follow the rules while making the fianncail statement for the company. it increase the financial productivity of the business. the company respects the culture, traditions, practices of the communities in which it do work
The associated summary of financial statements, which entails of the statement of financial position as at 30 June 2016, the statement of comprehensive income for elected purposes for the year then ended, are copied from the audited financial report of Child Fund Australia for the year ended 30 June 2016. The report shows that the company is having good conditions in financial term and it maintains it in a efficient manner. It has been found from the research that large as well as medium charities of Australia are facing renewed inspection of their financial reports which would be gathered through national regulator and represent to the public by using a searchable internet database. Along with that it has been anlayzed that the national regulator is the Australian Charities and Not-for-profits Commission (ACNC) is made in 2012 with the help of Commonwealth government. It has been analyzed that the child fund Australia has transparency in their work as the charity has a full current report on the websites of the company along with the historic reports (Su and Tsang, 2015). There is a private policy available that helps to not reveal the personal information about the employees as well as sponsors. The most benefit factor of this company is that it gives entire detail of using charity amount to the sponsor so that they can rely on the company in good manner (Abdul-Baki, Uthman and Sannia, 2014).
It has been analysed that four research studies are taken in use to describe the research topic in more effective manner. Similarity of all research articles are focused on analyzing the importance of accountability for non-governmental organizations. The first study of the research shows the how donors believe any NGO as the compelling NGO to be maintained (O'Dwyer and Unerman, 2010). The next research study defines to assess the attractiveness of descending accountability mechanism for recognition with its further to support in the area of right-based development approaches. The third study showed the increased demand of accountability due to work across borders (Cull, Harten, Nishida, Rusu and Bull, 2015). It has been explored by fourth study that it is essential for having the effective accountability in case of delegating some particular tasks to some NGOs.
The research which was conducted in the first go indicates that all the NGO’s are also being asked about the objectives which they have proposed. But there is a different perspective to this as well, though the donors want to know what happened to the amount which was supposed to be propagated towards the betterment of Children but this might bring in some adverse effects too as NGO’s would start limiting their operations and would stop exploring new arenas as they know that they will have to answer possibly everything which might create some strange situations (Schmitz, Raggo and Bruno-van Vijfeijken, 2012). This research also indicated that whenever the NGO’s are forced towards being more accountable in accordance with the demands of the donor they start following a different strategic behaviour where they become extremely paper work oriented rather than being more effective on ground, as it is quite obvious that it is next to impossible to be 100% accountable towards the donors for anyone (Child Fund Australia, 2018). According to the second study we come to know that NGO’s should be accountable directly in terms of the donation provided in accordance to the total ground impact achieved for which the fund was requested. Although the NGO’s are reluctant towards this as well, the government can change the picture by implementing a methodology by deriving a balance between the accountability towards donors and making sure that the results create a positive expected impact (Elbers and Arts, 2011).
The third research indicates that in order to bring the planning and the final outcome on the same page, a deep sense of trust is supposed to be built between the beneficiaries and donors with the help of which they key stake stakeholders can keep an eye and make sure that everything is running smoothly. If the transparency exists, it will eventually result in cooperation and more effective ground results rather than simply showing paper oriented results (Charnovitz, 2012). The fourth research tries to tell us that there is something equally important as external accountability and that is internal accountability which will be smoothen the internal operations, vulnerability to which is a bigger threat towards the final result and aspirations which the organization has. If it is controlled in an organized manner, then the hierarchy within will be able to understand and solve problems more efficiently as they might not be reluctant towards answering someone external as they already done their homework, this would empower them more and will allow them to think freely and out of the box. However, the research limitations have been found in which it has been analysed that the research could be more effective if it shows the description of financial analyse of NGOs in depth way (Mihaltan, Vitan and Cucui, 2015).
Aims and objectives
The aim and objective is the major part of the research paper as it facilitates to understand the concept of the research and the reason behind conducting the research in an appropriate manner. The objective of this research is defined below
- To assess the manner in which financial ratios can be used in the assessment of financial performance of NGOs.
- To identify how trend analysis assist in the financial performance analysis of NGOs.
To recommend that strategies can be used by the NGOs to enhance their financial performance.
Research design and methodology
The research methodology is an important aspect of the research. It guides the researcher throughout the study. It discusses all the techniques and job tactics, which will be used in the research. The research methodology is a crucial section of the research as the researcher will be able to analyze different methods and techniques used for data collection and data analysis. Therefore, he can choose the best method for the research study. The research is the process of acquisition of novel knowledge. It is a scientific and systematic query for the pursuit of knowledge. It is an academic activity and the researcher should use observation, comparison and experiment to acquire new knowledge.
In the present section, all the major aspects of the research methodology, such as research design, research approach, data collection and the data analysis method are discussed.
In the present, descriptive research type is taken. In this research type, the researcher aims to describe the characteristics of a particular phenomenon. In the descriptive research, the characteristics of a phenomenon will be analyzed. The research will be used to analyze the characteristics of a situation. The present research aims to analyze if the charity and the fund organizations are properly and optimally utilizing the resources of the organization. It ensures that the organization is fulfilling the goals and objectives of the organization. It is a financial analysis, which can be conducted through trend analysis and ration analysis. The research will be conducted on the charity organizations. There are also other research type, namely, exploratory research and explanatory research. In the exploratory research, the researcher pursues new information or knowledge. He tries to collect novel information, which can be used to devise a new theory. The explanatory research tries to explain a specific phenomenon with the existing knowledge (Gast and Ledford,2014).
The researcher will use the mixed approach to complete the research. In the mixed research approach, the researcher uses the combination of qualitative and quantitative research methodology. The research will use the combination of both methods to eradicate the weakness of individual methods. There are three types of research approaches, namely, qualitative, quantitative and mixed research approach. In the qualitative research approach, the researcher makes use of descriptive information for the research. The qualitative research methods do not use numerical data. The qualitative research emphasizes the use of information, characteristics and description of the meaning. On the other hand, the quantitative data uses the statistical or numerical data. The qualitative research provides rich and detailed information about a social phenomenon (Silverman, 2016). There are certain benefits of the qualitative research, namely, provide in-depth and detailed information. It stimulates through the experiences of other people and analyzes their feeling about certain actions. However, there are certain disadvantages of the qualitative data such as it studies only a few people. It means that the qualitative research is time-consuming and the staff members have to invest in terms of time and budget; therefore, a small sample size is used in the research. As the sample is small and few people participate in the research, the findings of the research cannot be generalized to large population (Glesne, 2015). Further, the systematic comparison of the research findings is also challenging as the individual findings can differ drastically.
On the other hand, the quantitative data uses the statistical methods to acquire the crucial research information. There are several benefits of the quantitative data analysis method, such as it allows the researcher to generalize the results for a larger study. It also increases the objectivity and the accuracy of the research. The researcher can also avoid personal bias as he can keep a distance from the research participants. The quantitative research also has certain disadvantages, such as it has limited applicability as the results emphasize numerical description rather than descriptive analysis. The research is conducted in a discrete manner; therefore, the researcher has more control over the data. Therefore, manipulation from the hands of researcher is possible (Resnik, 2015, December). Therefore, in the present research, mixed research methodology will be used so that the weakness of both the data collection methods can be addressed and the strengths of both the methods can be used.
There are two types of data, primary data and the secondary data. The primary data is collected through the primary sources, in which the data is collected from the source of generation. The data is collected for the first time by the investigator. The data has high degree of accuracy and it is more reliable. However, the collection of primary data requires investment in time and energy.
The secondary data is collected from the secondary sources, in which the data is collected from secondary sources. It means that the data is collected by one person and used by different agencies. In the present research, the secondary data will be used. The secondary data will be collected through different sources such as journal articles, books and other research papers (Neuman and Robson, 2014). The researcher will collect the secondary data from authentic and reliable resources so as to maintain that the authenticity of the research. Financial and annual reports of the firms will also be analyzed for the financial analysis.
Data Collection Method
In the present research, secondary data will be collected through different sources, namely, sales report, financial statements, books and journal articles. The secondary data can be both qualitative and quantitative in nature. The qualitative data can be obtained from different resources, namely, newspaper, interview and transcripts (Taylor, Bogdan and DeVault, 2015). Similarly, quantitative data can be analyzed through survey, financial statements and statistics. The secondary data is commonly used as it is easy to acquire and less time is needed to gather relevant information for the research (Kumar, 2014). It is not as expensive and can be easily accessed. However, there is a significant challenge in the research as the data might not be specific as it was not collected for the research. It can impact the authenticity of the data.
In the present research, two data analysis methods will be used, thematic analysis and financial analysis method. The thematic analysis is the most common form of data analysis in the qualitative research. In this method, the researcher uses pinpointing, examining and recording patterns to analyze the data (Mihaltan, Vitan and Cucui, 2015). The themes refer to the patterns in the data set, which can be used for the data analysis in the qualitative research. The thematic analysis is the umbrella term, which can be used for different approaches rather than a specific method. There are several methods of thematic analysis, which are required to create meaningful patterns, namely, getting familiar with the data, generating initial codes, searching for themes in the code, reviewing themes, naming themes and conducting final analysis (Taylor, Bogdan, and DeVault, 2015). The thematic analysis is used in the qualitative research to examine the themes in the data. In this method, the data set is organized and analyzed in detail (Panneerselvam, 2014). It tries to analyze the implicit and the explicit ideas within the data. In the coding process, different themes are developed for the interpretation of data. Different codes are interpreted by comparing the frequency of the themes, theme co-occurrence and displaying relationships between different themes. The theme represents a patterned response or meaning of the data. The themes are analyzed with the help of research questions or prevalence of certain subjects. Those themes are selected for the research, which is present in the recurring manner in the data set.
Addressing Ethical Concerns through Research Design
The present research design will address different ethical concern of the research. In the research design, the literary information will be collected through journal articles and books. The researcher will ensure that all the information is reliable and authentic. In this regard, the journal articles and the bools published in the recent years will be selected for the research. No information will be taken from the unauthentic sources such as Wikipedia and the blogs (Mackey and Gass, 2015). The researcher will also create a reference list and give credentials to all the authors, whose work will be selected in the research.
It can be summarized that the research methodology is the crucial aspect of the research. Research methodology discusses different methods and techniques, which will be required to complete the research. In the present, the descriptive research design is used which means that the researcher will describe whether the not-for-profit organizations optimally uses their financial resources. In this regard, the present research will use the research type of descriptive research. It means that the researcher will describe the existing information for explaining the research. The research will use the secondary data for completing the research. The secondary data refers to the data, which is collected from other resources. However, the researcher has determined several criterions, which will be used to maintain the credibility of the data. The researcher will use the thematic data analysis method.
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