RubinBrown Colleges & Universities Stat Book | NOT-FOR-PROFIT INSTITUTIONS

Primary Reserve Ratio Frequency by Percentage of Institutions

When an institution’s viability ratio falls below 1:1, it runs a greater risk of not being able to sustain itself with institutional resources in the event of a market or industry downturn. Certainly some institutions can thrive at a viability ratio of less than 1:1, but each one should evaluate how affordable its debt might be and work towards its targeted threshold. Not-for-profit institutions had an average viability ratio of 1.24 in FY16, 1.16 in FY17 and 1.20 in FY18. Institutions that had little or no outstanding debt at year-end were not included in the calculation of averages or ranges. There were six institutions in FY16 and FY18 and five institutions in FY17 that had no debt outstanding at their fiscal year end. Additionally, there were two institutions in all three years with so little debt that the viability ratios were excluded from the calculations for both years. Notably, 41% in FY16, 44% in FY17 and 47% in FY18 of the not-for-profit institutions with debt had viability ratios in excess of 1:1.

50%

35.8% 35.8% 41.5%

40%

30%

22.7% 22.7% 18.9%

13.2% 15.1% 13.2%

15.1% 13.2% 13.2%

20%

13.2% 13.2% 13.2%

10% PERCENT OF INSTITUTIONS (%)

0%

>1.5

< 0.0

0.0–0.5

0.5–1.0

1.0–1.5

FY16

FY17

FY18

Average Primary Reserve Ratio by Size of Institution Net Assets > $100m Net Assets < $100m

FY16

1.37

0.30

Viability Ratio Frequency by Percent of Institutions

FY17

1.45

0.35

50%

FY18

1.53

0.36

40%

22.2% 33.3% 30.4%

This indicates a significant strain on their existing resources. Overall, approximately 60% of the institutions exceeded the target of 0.4 for FY18, while approximately 50% exceeded the target for FY16 and FY17. There was also a wide disparity in the primary reserve ratio between institutions with net assets over $100 million and those under $100 million. Institutions over $100 million in net assets had on average 18 months’ worth of expenses available to be met with expendable net assets in FY18. Institutions with net assets under $100 million only had approximately 4 months’ worth of expenses available to be met with expendable net assets. Viability Ratio The viability ratio is a similar tool for institutions to evaluate how they could use their expendable net assets to pay down existing capital related debt (excluding borrowing for liquidity purposes).

30%

17.8% 20.0% 23.9%

22.2% 13.3% 10.9%

20.0% 17.8% 19.6%

20% 10% PERCENT OF INSTITUTIONS (%) T 17.8% 15.2% 15.6%

0%

> 1.5

< 0.0

0.0–0.5

0.5–1.0

1.0–1.5

FY16

FY17

FY18

Average Viability Ratio by Size of Institution Net Assets > $100m Net Assets < $100m

FY16

2.01

0.82

FY17

1.93

0.74

FY18

2.09

0.71

4

Not-For-Profit Institution Scores