KEY FINANCIAL METRICS & DASHBOARD REPORTING FOR …
1/26/2016
KEY FINANCIAL METRICS & DASHBOARD REPORTING FOR HIGHER EDUCATION INSTITUTIONS
January 26, 2016
Jim Creeden Partner
jcreeden@
Adam Smith Director
asmith@
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1/26/2016
TO RECEIVE CPE CREDIT
? Participate in entire webinar ? Answer polls when they are provided ? If you are viewing this webinar in a group
Complete group attendance form with ? Title & date of live webinar ? Your company name ? Your printed name, signature & email address
All group attendance sheets must be submitted to training@ within 24 hours of live webinar Answer polls when they are provided
? If all eligibility requirements are met, each participant will be emailed their CPE certificates within 15 business days of live webinar
GOALS FOR TODAY
Importance of Financial Metrics & Ratio Analysis Review & Evaluate Key Financial Metrics & Ratios Composite Financial Index (CFI) & Linkage to Strategic Planning Presenting Results in Dashboards
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FINANCIAL METRIC & RATIO ANALYSIS
? Why important?
Recent economic factors & industry pressures Transparency Accountability
? Identification of financial risks ? Method of communication to stakeholders ? Risk with peer comparisons
Apples vs. oranges?
1/26/2016
MOODY'S & S&P RATING CONSIDERATIONS
? Four broad factors in assessing ratings
Market profile Operating performance Wealth & liquidity Leverage
? Self-assessment & benchmarking
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MOODY'S & S&P RATING CONSIDERATIONS
? Positive indicators of self-assessment & benchmarking
? Identification of key performance indicators ? Monitoring of key performance indicators ? Examples of leadership actions based on performance relative to key indicators ? Comparison to carefully selected set of peers
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Resource Sufficiency & Liquidity Ratios
RATIO/METRIC
? Primary reserve ratio ? Monthly/annual days of
cash on hand ? Monthly/annual liquidity ? Expendable financial
resources ? Monthly/annual liquidity to
demand debt
OVERALL OBJECTIVES
? Sufficient amount of funds to meet current & future operating & capital requirements
? Ability to achieve & sustain a level of resources sufficient to realize mission
? Insight about capacity to manage through stress
? Operating flexibility
Primary Reserve Ratio Calculation
? Compares expendable net assets to total expenses
? Snapshot of financial strength & flexibility
? Indicates how long institution can function using expendable reserves without relying on additional net assets generated by operations
? Assets that could be access quickly to spend to satisfy obligations
? Helps understand affordability of strategic plans
Numerator Denominator
Private Institution
Public Institution
Expendable Net Assets
Expendable net assets plus FASB CU expendable
net assets
Total Expenses
Total expenses plus FASB CU total expenses
Source: Strategic Financial Analysis in Higher Education, Seventh Edition (KPMG, Prager Sealy and Co., and Attain, 2010)
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0.80
0.70
0.60
0.50
0.56
0.40
0.30
0.20
0.10 2012
Primary Reserve
0.70 0.65
2013
2014
Represents a sample of 40 Midwest based private institutions
0.70 2015
Monthly/Annual Days of Cash On Hand
? Measure number of days an institution is able to operate from unrestricted liquidity within one month & one year
? Measure of operating flexibility & cushion
? Highly correlated with Moody's ratings
Numerator Denominator
Monthly/Annual Liquidity X 365
Total expenses less: Deprecation
Other large noncash expenses
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70
60
50
55
40
30
20
10
0 2012
Days of Cash on Hand
62 64
2013
2014
Represents a sample of 40 Midwest based private institutions
61 2015
Monthly/Annual Liquidity
? Distinguishing between wealth & liquidity
? Takes into account donor restrictions, accounting rules, investment strategies, etc.
Funds available within one month (one year) Consists of unrestricted operating accts or Other non-endowment unrestricted funds
? Assess how much liquidity to meet large unexpected payments, demand or accelerated payments on debt
Lesser of Funds available within one month (one year) in endowment or other long-term funds or Unrestricted Board Designated Endowment
as presented in footnotes or self-reported (public institutions)
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Expendable Financial Resources
? Indicates amount of net assets spendable in long run
Total unrestricted & temporarily restricted net assets
Long-term debt, less net investment in plant
Source: Strategic Financial Analysis in Higher Education, Seventh Edition (KPMG, Prager Sealy and Co., and Attain, 2010)
Expendable Financial Resources to Direct Debt
1.40
1.28
1.32
1.20
1.13
1.00
1.00
0.80
0.60
0.40
0.20
0.00 2012
2013
2014
2015
Represents a sample of 40 Midwest-based private institutions
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