ABSTRACT
Financial performance of an institution is one of the greatest tools’ analysts used in determining the status of an organization in terms of business operation. Knowing how well-diversified the economy in the present time makes it more important for business entities to have knowledge and understand financial analysis to benefit them from proper management of their financial assets not only in its current phase but as well as in its future function. This study analyzed the financial performance of the Bulacan Agricultural State College using its financial statements for the fiscal years 2009 to 2013. The researchers made use of the following financial statements to meet the objectives of the study - Balance Sheet, Income Statement, Cash Flows Statement and Government Equity. The following financial ratios - liquidity ratio, solvency ratio and profitability ratio – were also used. The financial statements of Bulacan Agricultural State College have been prepared in conformity with generally accepted state accounting principles and reflect amounts that are based on the estimates and informed judgment of management with an appropriate consideration to materiality. Though there are difference in some of the financial statement’s decimal presentation, the researchers are still able to compute for the financial ratios including liquidity ratio, solvency ratio and profitability ratio which are most needed to complete the study and have a good judgment in the college’s financial performance for the calendar year 2009-2013.
Keywords: financial performance, financial statements, financial ratios
INTRODUCTION
Epstein and McFarlan (2011) held significant effort of measuring non-profit performance that’s often focused on financial metrics. Although these measurements are certainly important, measuring organizational success must focus primarily on achieving their mission. But just as with for-profit organizations, these nonfinancial measures of success are often less precise and far more difficult to measure. The relevancy, though, is obvious and the task is critical. For this reason, it is important for non-profit organizations to constantly measure performance related to both their financial efficiency and their effectiveness in meeting organizational goals.
Based on the website of Investopedia (2014), an online dictionary, financial performance is defined as a subjective measure of how well a firm can use assets from its primary mode of business and generate revenues. This term is also used as a general measure of a firm’s overall financial health over a given period of time, and can be used to compare similar firms across the same industry or compare industries or sectors in aggregation.
Given the fact, financial performance analysis is not only exclusive for profit organizations, but for non-profit organizations as well. This analysis may range from a variety of ways. One of the most commonly used are the financial ratios. These ratios are beneficial in determining the solvency, liquidity and profitability of an organization. By simply looking at the figures computed using the method, analysts may be able to make good judgment whether a company and other related firms or institutions are doing good in the overall aspects of its business decision-making process including the use and allocation of its resources.
Such kind of analysis will also benefit people outside the organization for it gives background about their financial condition and how well their business performance is doing in a going-concern manner. Analyst may use the data obtained in shaping potential equity. Likewise, credit analyst may find it useful in evaluating the creditworthiness of an entity for a better judgment in terms of future transactions including the grant of credit.
BACKGROUND OF THE STUDY
Bulacan Agricultural State College (BASC) started as Plaridel Community Agricultural High School in 1951. The first site was in Plaridel, Bulacan then it was transferred to its present location in San Ildefonso, Bulacan. It was later named Bulacan National High School. On 1959 June 21, Republic Act No. 2416 was passed into law renaming Bulacan National High School as Bulacan National Agricultural School.
After 39 years, Republic Act No. 8548 was passed into law by the Congress of the Philippines on 1988 February 24 elevating the school into a college: Bulacan National Agricultural State College. The Congress of the Philippines passed into law Republic Act No. 9249 renaming Bulacan National Agricultural State College as Bulacan Agricultural State College dated 2004 February 29.
As one of the colleges, BASC endeavors to be a center of development/excellence in agriculture, arts and sciences, forestry, teacher education and entrepreneurship responsive to the national goals of food security, poverty alleviation, sustainable development, global competitiveness and people empowerment. Its vision is to be a premier institution responsive to the ever-changing needs of the community, producing quality graduates and appropriate technologies which are locally directed but globally competitive. (Bulacan Agricultural State College [BASC], 2014).
As part of this study, the researchers evaluated the financial performance of Bulacan Agricultural State College. By means of this, its personnel particularly the non-teaching staff will be able to have an access on how well the college properly manage the daily operating activities of the school. This study will also be useful to the other researchers to understand how it is important for an institution to oversee its funding system.
Theoretical Framework
This study is anchored on the Prospect Theory developed by Kahneman and Tversky (1979), which contends that people value gains and losses differently, and as such, will base decisions on perceived gains rather than perceived losses. Thus, if a person were given two equal choices, one expressed in terms of possible gains and other in possible losses, people would choose the former – even when they achieve the same economic end result.
Traditionally, it is believed that the net effect of the gains and losses involved with each choice are combined to present an overall evaluation of whether a choice is desirable. Academics tend to use “utility” to describe enjoyment and contend that we prefer instances that maximize our utility.
Another theory related to the evaluation of financial performance is the Resource Dependence Theory introduced by Pfeffer and Salancik (1978). This is built around the central hypothesis that organizations are constrained by external pressures and demands. Consequently, the key organizational survival is the ability to acquire and maintain resources. Resource dependence can be linked to the idea of coercive isomorphism. This concept has been developed by DiMaggio and Powell (1983) as part of their institutional theory, explaining why organizations are driven to similarity, a process they call “isomorphism”.
As stated in the study of Verbruggen, Christiaens, & Millis (2009), resource dependence theory as well as institutional theory, the choices of an organization are limited by external pressure. In the case of institutional theory, these pressures stem from the institutional environment that sets and enforces the rules. This can be the government as well as the pressure groups or public opinion. Resources dependence stresses the pressures shaped by those who control scarce resources. In the case of nonprofit organizations, both loci of power (at least partially) coincide, since the government quite often is the institution that sets the rules and holds money. Therefore, resources dependence and institutional theory provide a theoretical background to explain nonprofits’ compliance with financial reporting regulation.
The theories above provided the researcher appropriate ideas and concepts used to further augment the development of this study. These helped the researchers to have deeper analysis of the study and guided them to formulate conclusions with better recommendations.
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