What Environmental Factors Drive Unrestricted Assets and Liabilities?

Positive working capital results from managing unrestricted current assets that exceed the value of unrestricted current liabilities, so we look at what drives these component parts separately. One-quarter of an organization’s expected level of unrestricted current assets can be understood by recognizing norms for its sector and budget size, and the characteristics listed below relate both to the organization and to its community. Most of the remaining variation in an organization’s level of unrestricted current assets is attributable to its expertise, good decision-making, reputation, etc., which is captured in its KIPI. 

What organizational characteristics affect this performance?

• Total unrestricted current assets tend to be higher for organizations that target Asian Americans, and with higher levels of fixed assets and unrestricted contributions (specifically support at the state level). They also tend to grow larger as organizations age.

• When organizations target kids or African Americans, their unrestricted current assets tend to be lower. Unrestricted current assets also tend to decrease when an organization has high levels of earned revenue, local funding, and when its offerings include a high proportion of world or national premieres.

How do community arts and leisure characteristics affect performance?

• Having more arts education organizations, dance organizations, art museums, community-based organizations, theatres, or symphony orchestras in a community tends to raise the unrestricted current asset tide for all organizations in these sectors within the market while having more performing arts centers and nearby restaurants, bars, and hotels tends to lower the unrestricted current assets for all organizations in these sectors within the market.

How do socio-demographic characteristics of the community affect performance?

• Unrestricted current assets are higher for organizations in communities where Hispanics/Latinos and African Americans make up a greater percentage of the population. This is also the case in communities where the population’s overall level of socioeconomic status is higher.

• As the proportion of people aged 25 or younger in the community increases, unrestricted current assets go down. Unrestricted current assets also tend to be lower in more densely populated communities and in those with proportionally more Asian Americans.

What impact does public funding have on performance?

• Overall state and federal grant activity in the larger local marketplace has a positive effect on an individual organization’s level of unrestricted current assets.

Positive working capital results from managing unrestricted current assets that exceed the value of unrestricted current liabilities, so we look at what drives these component parts separately. Only 14% of an organization’s expected level of unrestricted current liabilities can be understood by recognizing norms for its sector and budget size, and the characteristics listed below relate both to the organization and to its community. Of the remaining variation in an organization’s level of unrestricted current liabilities, 31% is attributable to its expertise, good decision-making, reputation, etc., which is captured in its KIPI.  More than half of what drives unrestricted current liabilities is random, meaning this is an area that, 1) is relatively less influenced by the organization’s situation and environment, and 2) has attracted somewhat less attention and focus in terms of intellectual capital or expertise developed by organizations.