The Society’s Financial Guidelines

The Society's financial guidelines have evolved from a series of Financial Planning Conferences dating back to the 1970s. Typically, members of Society Governance attending the conferences review the guidelines as well as the Society's financial performance in conformance with the guidelines. Conference participants reaffirm or recommend revisions to the guidelines as conditions warrant. Final authority for establishing the Society's financial guidelines rests with the ACS Board of Directors. The current guidelines are as follows:

• The current ratio provides a sense of whether the organization has sufficient liquid assets to meet its obligations as they come due. This ratio is calculated using information from the Society’s balance sheet, short-term assets and short-term liabilities. The Society has a current ratio target of .65x, which means the Society’s current assets are expected to represent at least 65% of current liabilities.
• The debt ratio is used to assess the organization’s ability to meet its long-term obligations. This ratio is useful in forecasting an organization’s long-term solvency. It examines the relative contributions that creditors and owners make to the financing of assets. A maximum debt ratio of 35% has been established. This means that no more than 35% of the Society’s total capitalization will be in the form of debt. This maximum percentage was established because, from the Society’s point of view, debt capital is less desirable than holding net assets because debt carries obligations imposed by the creditor.
• Free cash flow is an indication of the amount of cash being generated by the operations of an organization less expenditures for capital purchases. The Society established a guideline that free cash flow will be positive over a three year rolling average.
• The fund balance ratio is an indication of the Society’s ability to survive a catastrophic uninsured event or to finance a strategic acquisition. This ratio reflects the percentage of next year’s operating expenses that could be paid for if all existing assets were converted to cash. The target for the Society’s fund balance has been established at 60% of the next year’s projected operating expenses, within a range of 40% to 80%.
• The sustainability guideline is a measure of the Society’s operating performance and is calculated as net contribution divided by gross revenue. The ACS Board of Directors adopted this guideline in 2005 and established 1%, 1.5%, 2%, and 2.25% as Society's net contribution targets for 2006, 2007, 2008, and 2009, respectively.