PubFinCriteria_2006_part1_final1.qxp

Program offerings. Schools with highly special-
ized programs can fall out of favor quickly. On the
other hand, schools with specialized programs are
often successful because of a lack of significant
competition, or a niche program. Conversely, com-
prehensive institutions with a wide variety of
undergraduate offerings plus many strong graduate
programs generally experience less volatile enroll-
ment, even if demand falls off in a particular area.
Standard & Poor’s examines the popularity of vari-
ous curriculum offerings and notes program clo-
sures and openings.
Competition. In analyzing competition, a key
question is, which colleges does this institution win
or lose students from or to? Although exact

win/loss statistics can be hard to obtain, such infor-

mation gives Standard & Poor’s insight into the

institution’s competitive position. Analysis of com-

petition enables Standard & Poor’s to determine

whether the school has its own niche, or whether it

must constantly change its programs to adjust to

external competition. Obviously, first-choice

schools are less vulnerable than students’ second or

third selections.

Retention and graduation. A trend of increasing

attrition is a sign of rising student dissatisfaction

and is often a precursor to declining demand. The

reasons for such a trend, and actions taken to cor-

rect it, are examined. The nation’s most selective

institutions generally demonstrate freshmen reten-

Higher Education

http://www.standardandpoors.com 177

Revenue diversity (all numerators divided by total unrestricted operating revenues)

Tuition dependence (%) Numerator = gross tuition and fees

Gifts and pledges (%) Numerator = annual fund gifts and pledges

Endowment income (%) Numerator = endowment spending policy income

Health care operations (%) Numerator = health care operating revenues

Auxiliary operations (%) Numerator = auxiliary system operating revenues

Expense and financial aid ratios

Instruction (%) Instructional costs/total operating expenses

Tuition discount (%) Total financial aid costs/gross tuition and fees

Financial aid burden (%) Total financial aid costs/total operating expenses

Bottom line results

Net operating income (NOI) (%) Change in UNA/total unrestricted operating revenues

Net income (IN) (%) Change in UNA/total unrestricted revenues

Return on net assets (%) Change in total nett assets/total net assets (BOY)

Balance sheet ratios Liquid ratios

Cash and investment/operations (%) Total cash and investments/total operating expenses

Unrestricted resources/operations (%) Unrestricted resources/total operating expenses

Expendable resources/operations (%) Expendable resources/total operating expenses

Debt ratios

Unrestricted resources to debt (%) Unrestricted resources/total debt

Expendable resources to debt (%) Expendable resources/total debt

MADS burden (%) MADS/total operating expenses

Full-time equivalent measures

Net tuition per FTE (%) Tuition revenue less financial aid/FTE students

Revenue per FTE ($) Total operating revenue/FTE students

Expenses per FTE ($) Total operating expenses/FTE students

Pro forma debt per FTE ($) Total pro forma debt/FTE students

Unrestricted resources per FTE ($) Unrestricted resources/FTE students

Expendable resources per FTE ($) Expendable resources/FTE students

UNA—Unrestricted net assets. MADS—Maximum annual debt service. Unrestricted resources—(UNA - (net PPE - long-term debt).

Expendable resources—(UNA + TRNA - (net PPE - long-term debt). PPE—Property, plant and equipment.

TRNA—Temporarily restricted net assets.

Selected College/University Financial (FASB) Ratios