Harvard Case - University of Regina Club: Financial Statement Analysis
"University of Regina Club: Financial Statement Analysis" Harvard business case study is written by Nourhene Ben Youssef, Walid Busaba, Saqib A. Khan. It deals with the challenges in the field of Finance. The case study is 9 page(s) long and it was first published on : Sep 10, 2018
At Fern Fort University, we recommend the University of Regina Club pursue a growth strategy focused on increasing membership and revenue through a combination of financial analysis, capital budgeting, and risk management. This strategy will involve a comprehensive review of the club's financial statements, identifying areas for improvement in profitability, liquidity, and asset management. We also recommend exploring new revenue streams through strategic partnerships and event diversification, while implementing cost-effective operational improvements.
2. Background
The University of Regina Club is a student-run organization facing financial challenges. Despite a strong membership base, the club struggles to generate sufficient revenue to cover its operating costs. The case study highlights the club's reliance on membership fees and limited fundraising efforts, leading to a precarious financial position. The club's leadership seeks guidance on improving its financial performance and ensuring long-term sustainability.
The main protagonists of the case study are the club's executive team, responsible for managing the club's finances and operations. They are seeking advice from a consultant to address the club's financial challenges and develop a sustainable growth strategy.
3. Analysis of the Case Study
To analyze the University of Regina Club's financial situation, we will utilize a framework combining financial statement analysis, ratio analysis, and capital budgeting.
Financial Statement Analysis:
- Income Statement: The club's income statement reveals a reliance on membership fees as the primary revenue source. This creates a vulnerability to fluctuations in membership numbers.
- Balance Sheet: The balance sheet highlights the club's limited assets and potentially high debt levels, indicating a need for improved asset management and debt reduction strategies.
- Statement of Cash Flows: Analyzing cash flows will help identify areas of inefficient cash management and potential opportunities for cost reduction or revenue enhancement.
Ratio Analysis:
- Profitability Ratios: Analyzing profitability ratios like gross profit margin and net profit margin will help determine the club's efficiency in generating profits and identify areas for improvement.
- Liquidity Ratios: Analyzing liquidity ratios like the current ratio and quick ratio will assess the club's ability to meet its short-term obligations.
- Asset Management Ratios: Analyzing asset management ratios like inventory turnover and accounts receivable turnover will reveal the club's efficiency in utilizing its assets.
- Market Value Ratios: While not directly applicable to a non-profit organization, these ratios can be adapted to assess the club's value proposition to its members and potential sponsors.
Capital Budgeting:
- Investment Decisions: The club needs to carefully evaluate potential investments in new equipment, technology, or programs, considering their potential return on investment (ROI) and impact on overall profitability.
- Cost-Benefit Analysis: Analyzing the costs and benefits of potential projects will help the club prioritize investments that align with its strategic goals.
4. Recommendations
The University of Regina Club should implement the following recommendations to improve its financial performance and ensure long-term sustainability:
Financial Management:
- Conduct a comprehensive financial analysis: This should include a detailed review of the club's financial statements, ratio analysis, and cash flow analysis. This analysis will identify areas for improvement in profitability, liquidity, and asset management.
- Develop a robust budgeting process: The club should implement a detailed budgeting process, including forecasting revenue and expenses, to ensure financial stability and accountability.
- Implement a cash flow management system: This will help the club track its cash inflows and outflows, improve cash forecasting, and optimize working capital management.
- Explore alternative revenue streams: The club should explore diversifying its revenue sources beyond membership fees. This could include:
- Fundraising events: Organizing fundraising events like galas, auctions, or concerts can generate significant revenue.
- Sponsorships: Seeking sponsorships from local businesses or alumni can provide valuable financial support.
- Merchandise sales: Selling club-branded merchandise can generate additional revenue and promote brand awareness.
- Service offerings: The club could offer services like event planning or catering to other student organizations or university departments.
- Optimize cost management: The club should identify areas where costs can be reduced without compromising the quality of its programs and services. This could include negotiating better deals with suppliers, reducing unnecessary expenses, and exploring alternative sourcing options.
- Implement a strong internal control system: This will ensure the accurate recording and reporting of financial transactions, minimizing the risk of fraud or errors.
Growth Strategy:
- Expand membership: The club should develop a strategic plan to attract new members and retain existing ones. This could include:
- Marketing and outreach: Implementing targeted marketing campaigns to reach potential members through social media, campus events, and online platforms.
- Member engagement: Creating a welcoming and inclusive environment for members, offering valuable programs and services, and fostering a sense of community.
- Develop strategic partnerships: The club should seek partnerships with other organizations, businesses, or alumni to enhance its programs and generate new revenue streams. This could include:
- Collaboration on events: Partnering with other organizations to co-host events can increase attendance and revenue.
- Joint fundraising initiatives: Collaborating with other organizations on fundraising campaigns can leverage resources and expand reach.
- Diversify event offerings: The club should consider offering a wider range of events to cater to diverse interests and attract a broader audience. This could include:
- Educational workshops: Organizing workshops on topics relevant to students, such as career development, financial literacy, or leadership skills.
- Social events: Hosting social events like movie nights, game nights, or themed parties to foster a sense of community and attract new members.
- Invest in technology: The club should explore using technology to improve its operations and enhance member engagement. This could include:
- Online membership management system: Implementing an online system to manage membership applications, payments, and communication.
- Social media platforms: Leveraging social media platforms to promote events, engage with members, and build brand awareness.
Risk Management:
- Conduct a comprehensive risk assessment: The club should identify and assess potential financial risks, including fluctuations in membership, economic downturns, and operational inefficiencies.
- Develop a risk mitigation plan: The club should implement strategies to mitigate identified risks, such as diversifying revenue sources, building financial reserves, and implementing internal controls.
- Maintain adequate insurance coverage: The club should ensure it has adequate insurance coverage to protect against potential financial losses due to accidents, legal liabilities, or natural disasters.
5. Basis of Recommendations
The recommendations are based on the following considerations:
- Core competencies and consistency with mission: The recommendations align with the club's mission to provide valuable programs and services to its members while ensuring financial sustainability.
- External customers and internal clients: The recommendations consider the needs of both external customers (members) and internal clients (club executives).
- Competitors: While the club faces competition from other student organizations, the recommendations focus on differentiating itself through unique program offerings, strategic partnerships, and a strong focus on member engagement.
- Attractiveness ' quantitative measures if applicable: The recommendations are supported by quantitative measures such as profitability ratios, liquidity ratios, and return on investment (ROI) analysis.
- Assumptions: The recommendations assume that the club's leadership is committed to implementing the proposed changes and that the club has access to the necessary resources to support the growth strategy.
6. Conclusion
By implementing the recommended strategies, the University of Regina Club can improve its financial performance, ensure long-term sustainability, and continue to provide valuable programs and services to its members. The club's leadership should prioritize financial management, explore new revenue streams, and engage in proactive risk management to achieve its strategic goals.
7. Discussion
Other alternatives not selected include:
- Merging with another student organization: While this could provide access to additional resources, it could also lead to conflicts of interest or loss of identity.
- Seeking a loan from a financial institution: This could provide immediate financial relief, but it could also result in high interest payments and increased financial risk.
- Reducing program offerings: This could reduce the club's appeal to members and limit its ability to generate revenue.
The key assumptions of our recommendations include:
- The club's leadership is committed to implementing the proposed changes.
- The club has access to the necessary resources to support the growth strategy.
- The external environment remains favorable for student organizations.
8. Next Steps
The following steps should be taken to implement the recommendations:
- Form a task force: The club's executive team should form a task force to oversee the implementation of the recommendations.
- Conduct a comprehensive financial analysis: The task force should conduct a detailed analysis of the club's financial statements and develop a financial plan.
- Develop a marketing and outreach strategy: The task force should develop a strategy to attract new members and retain existing ones.
- Explore potential partnerships: The task force should identify and reach out to potential partners.
- Implement cost-saving measures: The task force should identify areas where costs can be reduced.
- Monitor progress and make adjustments: The task force should regularly monitor the progress of the implementation and make adjustments as needed.
By taking these steps, the University of Regina Club can achieve its financial goals and continue to provide valuable services to its members for years to come.
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Case Description
The University Club at the University of Regina was in financial distress. The club had been losing money for several years and was being subsidized by the University of Regina. However, due to budget cuts by the Saskatchewan government, the university was no longer in a position to subsidize the operations of the club. The board of the club had to make some tough decisions at this time. Could the club exist without university subsidy? Should the board increase membership fees, increase the number of members, or simply close the club? To make an informed decision they needed to perform a detailed analysis of the financial statements. An accounting professor, who had recently joined the club's board, suggested performing ratio analysis to assess the problem areas.
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