10 Financial Ratios (part 1 of 10)

  1. Debt to Budget Ratio
    1. Definition: Total Debt divided by Total Annual Budget
    2. Results
      1. Maximum: Less than 200%
      2. Optimum: Less than 100%
    3. Consequences: The higher the ratio the less financial margin you have. Churches must have margin to hedge against financial downturns and opportunities. This is just like your home mortgage – the more you owe and pay the bank each month, the less you have to do other things.

Now What? So What?

  • Compare your church’s financial ratios to the optimum range for each ratio.
  • Develop a 2-3 year plan to bring your ratios in line with best financial practices.

 Lead On!