Index-Specific Drivers Working Capital

Unrestricted Current Liabilities

What Drives Unrestricted Current 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.  Only 17% 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 related both to the organization and to its community. Of the remaining variation in an organization’s level of unrestricted current liabilities, 38% is attributable to its expertise, good decision-making, reputation, etc., captured in its KIPI.  Nearly half 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.

What organizational characteristics affect this performance?

• Total unrestricted current liabilities tend to be higher for organizations that target children, and with higher levels of fixed assets, state funding, and subscribers/members.
• When organizations have higher unrestricted revenue or when they have a high level of investments, unrestricted current liabilities tend to be lower.  Unrestricted current liabilities also tend to be lower when an organization’s offerings include a high proportion of world or national premieres, when they receive more federal support, or when they target kids or Hispanics/Latinos.

   

How do community arts and leisure characteristics affect performance?

• Unrestricted current liabilities tend to be higher for organizations in communities with higher levels of public broadcast activity, overall arts activity, and a larger presence of artists and arts providers. 
• Having more PACs, orchestras, theatre or dance companies, or music, or general performing arts organizations in a community tends to raise the level of unrestricted current liabilities for all organizations in these sectors in a market.  By contrast, the more opera companies, the more likely each is to have lower unrestricted current liabilities.

• Unrestricted current liabilities are higher for organizations in more populous communities, and where more of the community is Asian American.
• As the median age in the market increases, unrestricted current liabilities go down.  More philanthropy in the market drives down unrestricted current liabilities, as does a higher socioeconomic level.  Unrestricted revenue also tends to be lower in communities where with proportionally more Hispanics/Latinos.

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 liabilities.