The GuideStar Blog retired September 9, 2019. We invite you to visit its replacement, the Candid Blog. You’re also welcome to browse or search the GuideStar Blog archives. Onward!

GuideStar Blog

Measuring an Organization's Financial Health


Things to keep in mind when you are evaluating an organization's financial health:

  • A nonprofit's Form 990 is only a snapshot of the organization's finances at a specific time.
  • In general, the organization's total assets should be greater than its total liabilities, or it cannot long survive.
  • The kinds of assets and liabilities an organization has also affect its financial health.
    • For instance, current assets (such as cash, receivables, and securities) should cover current liabilities (such as payables, deferred revenue, and current-year loan and note payments). Otherwise, the organization may face solvency problems.
    • On the other hand, if an organization's cash and equivalents greatly exceed its current liabilities, the organization may not be putting its money to the best use.
  • Financial health is only one criterion for evaluating an organization.
Topics: Finance IRS Form 990 Nonprofits