In the January Church Finance Today, CPA and editorial advisor Vonna Laue detailed ratios for measuring net income, cash flow, and expense. She completes her coverage of important measurements to monitor with this article.
For some of the ratios, the top number of the ratio should be divided by the bottom number. This will produce a usable measurement for tracking trends and making comparisons.
Many loan covenants are based on the results of key debt ratios. If you violate one, there may be penalties and, in extreme circumstances, the lender may even call your loan, which requires you to refinance or pay off the remaining balance. Most importantly, you will strain the relationship with your lender.
Here are six debt ratios you can use to monitor your church's dependence on debt levels and identify any needed adjustments.
1. Debt to unrestricted contributions