INTRODUCTION ANDBACKGROUND/HISTORY OF THE BUSINESS
Qatar Cultural Creativity Center was established in 2005 following the decision of the President of General Authority of youth no. (2) for year 2005. The board of directors was constituted in 2012 following the decision of Minister of Culture, Arts, and heritage no (116) for year 2012. The Cultural and Creativity Center is a Not for Profit Organization. The Cultural Creativity Center targets the youth and aims at equipping them with both hard and soft skills that fosters the discovery of personal abilities (Ame Info). The Center teaches skills such as how to write and publish a book, how to market yourself, poetry, and time management among other critical skills (Ame Info).
The paper gathered data using three main methods research, interviews and survey.
Research
This paper relied on research to collect data and information. Since the Cultural Center does not have a website, the research collected information from the various sources such as their Twitter account, and news articles.
Interviews
We held long meetings with Mr. Ramiz and Mr. Essa Abdullah. Mr. Ramiz provided us with information about the financial position of the Cultural Center. Mr. Essa provided information about the strategic direction of the Cultural Center. The Main information collected through research includes the financial statements of 2012/2013/2014/2015, the mission statement of the Qatar Cultural and Creativity Center, and statistical figures. The data collected was used to analyze the financial performance of the center and form a basis of developing a strategic plan to remedy areas of weaknesses and improve in areas of strength.
Survey
We conducted a survey on youths who had attended the Cultural Center workshops to establish what they liked the most about the workshops and areas they would like to see improved. The sample consisted of 50 randomly selected respondents.
Financial Analysis
The financial analysis was conducted using ratios analysis. Ratio analysis evaluates the financial health of an organization and to compare the financial performance of a firm over time and to the peers (Peterson Drake and Fabozzi).The financial ratios analysis covers the liquidity ratios, the profitability ratios, the activity ratios, and the leverage ratios for the years 2013, 2014, and 2015.
The liquidity ratios measure the ability of a firm to meet its obligations as they fall due (Peterson Drake and Fabozzi).
Current ratio measures measure the amount of current assets the firm has for every Qatari Riyal of current liabilities. The current ratio has declined from 25.73 in 2012 to 1.49 in 2015 indicating a deterioration in the liquidity of the Cultural and Creativity Center .
The quick ratio deducts inventory from the current assets. The center does not hold inventory, therefore, the current ratio and the quick ratio for the organization are the same between 2012 and 2015.
The profitability ratios measure the ability of the organization to convert revenue into profit (Fridson and Alvarez). The profitability of the Cultural Center shows a worsening trend.
The gross margin shows what proportion of sales are converted into gross margin. The gross margin has improved from 42.94%% in 2012 to 55.97% in 2015. This means that the Center earned QR 42.94 for every QR 100 in sales in 2012, that rose to QR 55.97 for every QR 100 in sales in 2015.
The Net Profit margin shows what proportion of sales are converted into net profit. Despite having reasonably high gross margin, the Cultural center has failed to make a positive net income in 2012, 2014 and 2015, and only made a slight positive net profit margin of 5.16% in 2013. This indicates the inability of the Cultural Center to manage its operating expenses. In particular, the Cultural Center has a huge wage bill with salaries accounting for 42.70%, 30.63%, 38.87%, and 55.59% of the total revenues for 2012, 2013, 2014, and 2015 respectively.
Return on Investment (ROI) measures the profit earned for every QR of investment. The negative net income in 2012, 2014, and 2015 resulted in the firm posting negative ROI. However, in 2013 the Center posted a positive ROI of 19.20%.
Return on Equity (ROE) measures the return earned by the equity holders. The center posted ROE of -90.43%, -18.85%, 19.60%, and -50.91% in 2015, 2014, 2013 and 2012 respectively.
Activity ratios measure the ability of a firm to generate sales (turnover) from its assets (Fridson and Alvarez).
Inventory turnover ratio shows the number of times the organization turned over its inventory. The Cultural Center does not hold any inventory thus has zero inventory turnover ratios between 2012 and 2015.
Asset turnover shows the amount of sales the organization made for every QR in assets. The asset turnover has improved from 1.99 times in 2012 to 2.38 times in 2015. This means that the Cultural Center generated $2.38 in sales for every Qatari Riyal in assets in 2015 as compared to $1.99 in sales for every Qatari Riyal in asset in 2012. This represents a slight improvement in the ability of the Cultural Center to generate sales from its assets.
The fixed asset turnover ratio shows the amount of sales generated for every QR invested in fixed assets. The fixed asset turnover dipped slightly from8.59 times in 2012 to 7.89 times in 2015.
Collection period measures the number of days the organization takes to collect cash from its debtors. In 2015, The Cultural center did not have any receivables outstanding. The improvement in activity ratios indicates that the Cultural Center is better utilizing its assets to generate sales.
Leverage ratios measure the extent to which a firm uses debt in its capital structure. The Cultural Center has zero leverage because it does not use any debt in its capital structure. High leverage indicates a high reliance on debt financing. High leverage is undesirable because it increases the firm’s financial risk (Walton). A firm’s financial risk refers to the variability in the return to the equity holders due to the use of debt in the capital structure (Walton).
Debt/Asset ratio measures the proportion of assets that have been financed using debt. The debt ratio increased from 2.99% in 2012 to 19.67% in 2015 meaning that the proportion of assets financed by debt increased from 2.99% in 2012 to 19.67% in 2015.
Debt/Equity ratio shows the relationship between Debt and Equity. In 2012, debt was equivalent to 3.08% of equity but debt has increased to 88.14% of equity by 2015.
Overall, while the Cultural Center has a strong capital base, there is need for the center to check on expenses in order to improve on its profitability.
SMART Objectives
SMART Objective 1: increase the number of participants attending the workshops by 25% in the next twelve months. The Cultural Centers offers free workshops targeted at young Qataris. The workshops are conducted in Arabic covering a range of interests that include communication skills, critical thinking, writing novels, theater, and poetry (Ame Info).
Action 1: The marketing department will hold open-days in colleges and universities at least once every semester with the aim of publicizing the workshops.
Objective 1: increase the awareness among the young Qataris of the existence and the benefits of participating in the workshops.
Action 1: The marketing department personnel to visit colleges and universities
Objective 2: find out from the youth what would interest them
Action 1: The marketing department to attend open-dayss and interact with the youth
Action 2: The IT department will create a Website in the next twelve months Objective 1: faster interaction and dissemination of information to the youth, as more youth are more tech savvy (Coles).
Action 1: The Cultural Center will make use of other social media sites such as Facebook, Twitter, and Instagram to engage with the youth.
Objective 1: increase the Cultural Center online presence.
SMART objective 2: Reduce the reliance on subsidy by 10% every year for the next three years and increase Activity revenue to 50% over the next five years. Subsides accounted for 94.79%, 87.2%, and 84.41% of total revenue in 2015, 2014, and 2013 respectively, the high reliance on subsidies may not be sustainable in the future. However, the Cultural Center must remain true to its mission of providing the youth with free workshops.
Action 1: The marketing department to develop more fee generating activities
Objective1: increase activity revenue
Action 2: The Training department will encourage the youth to commercialize their skills and talents. For instance, the youth should be encouraged to write plays that they could sell tickets to the members of the public to attend.
Objective 1: increase its revenue streams
Objective 2: reduces their reliance on subsides.
SMART Objective 3: Achieve a net income of at least 10% in the next twelve months. Though the Cultural Center is a not-for-profit organization, it is important that the organization be able to sustain itself by generating positive net income (Bell, Masaoka and Zimmerman). A positive net income is modest and would be able to fund the growth of the organization. The Cultural Center is making impressive gross margins but still ends up making losses due t the high operating expenses.
Action 1: The HR department will Freeze new hiring.
Objective 1: contain increases in wage bill.
Objective 2: make the organization lean through natural attrition (Dhar).
Action 2: HR to enlist the help of volunteers to supplement the full time workers. Since the government owns the Cultural Center, retrenchments would not be an expedient option as it may spike political storms.
Action 2: The HR department will freeze salary increments for the next three years
Objective 1: Contain the high wage bill
Objective 2: reduce operating expenses.
SMART Objective 4: Introduce five new programs over the next twelve months.
Action 1: The Training department to carry out a survey within the next three months
Objective 1: to identify the gap in the programs available and the programs the youth desire to pursue.
Action 2: The Training department to identify an international cultural organization within the next twelve months
Objective 1: form collaborations with international counterparts
OVERALL CONCLUSION/RECOMMENDATIONS
Qatar Cultural Center plays an important role in equipping the Qatari youth with critical skills and necessary knowledge that they may need in order to develop their abilities to the fullest potential. It is important that the organization remain true to its mission in order to be relevant. Though the Qatar Cultural Center is not-for-profit, financial stability is the bedrock of any successful organization. Therefore, the Cultural Center should endeavor not just to meet its mission, but also to ensure that it is financially sound in order to be sustainable in the long-term.
Engage the youth more through a variety of platforms such as attending college open-days and use of online platforms such as websites, Facebook, Instagram, and Twitter.
Diversify the revenue streams by exploring sponsorship opportunities and encouraging the youth to cash in on their talents.
Put a freeze on hiring and salary increases in order to contain the high wage bill and reduce the operating costs.
Works cited
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