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New England Trust
Author(s):
Young, David W.
Functional Area(s):
   Finance/Financial Management
   Financial Accounting
Setting(s):
   Nonprofit
Difficulty Level: Beginner
Pages: 4
Teaching Note: Available. 
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First Page and the Assignment Questions:

Sandra Connor, Vice-President of New England Trust’s Nonprofit Lending and Charities Department, found herself sifting through scores of resumes to hire an assistant manager. Facing a glut of mostly MBA applicants for the position, Ms. Connor devised a system to test the applicants’ understanding of the nonprofit sector, and their ability to analyze financial statements for lending and investment decisions. She gave each of the selected candidates for the position ninety minutes to complete the following exercise.

Exhibit 1 contains summarized financial information for ten local and regional organizations, representing a diverse range of the nonprofit sector. The exhibit includes both balance sheet and operating statement information as well as a set of common ratios. You may find that other ratios are useful, and, if so, you should calculate them.

To report financial statements in a consistent manner, the following procedures were applied:

  • Accounts receivable are shown net of bad debt allowances
  • Plant and equipment is shown net of accumulated depreciation
  • Operating income includes fees for service, investment income and specific public funding for operations. All other sources of funding, such as public and private contributions and sales of assets, are classified as non-operating gains.

The organizations included on Exhibit 1 are the following (not in the order shown):

Boston Symphony Orchestra
Brigham and Women’s Hospital
Quincy City Hospital
The Ford Foundation
Family Service of Greater Boston
Tufts Associated Health Maintenance Organization
Harvard Community Health Plan, Inc. and Affiliates
Museum of Fine Arts, Boston
MassPort Authority
Oxfam America, Inc.

A brief description of each organization follows.

Boston Symphony Orchestra (BSO)

The BSO provides live musical performances to over one million admissions annually, and is heard by countless others through numerous radio broadcasts each year. BSO owns its performance facilities which include Boston’s Symphony Hall (much of which has been depreciated), and Tanglewood in Lenox, Massachusetts, where outdoor summer events and other activities are hosted. Although ticket sales account for a large portion of total revenues, endowment and other investment earnings, foundation support, and annual public contributions subsidize operating costs. . . .

Assignment

  1. Using the above information in conjunction with the financial information in Exhibit 1, identify each organization on Exhibit 1. Be prepared to defend the criteria you used in making your assessment?