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