A Look At Private College Financial Health

COLThis year Forbes? America?s Top College list once again features our proprietary Forbes Financial Grade measure of more than 900 private-not-for-profit institution?s financial health.

For the purposes of our 2015 analysis we averaged data from the three most recent fiscal years available from the Department of Education?s IPEDs database?2013, 2012 and 2011. Only private not for profit colleges were examined.

Our grades measure financial fitness as determined by nine components broken into three broad categories: balance sheet strength, operational soundness and certain other factors indicative of a college?s financial health, including admission yield.

Endowment Assets Per FTE ?(15%) ?This is year-end endowment assets divided by the number of 12 month full-time equivalent students. ?Full credit was awarded for anyone with more than $100,000 per FTE.

Primary Reserve Ratio ?(15%)- How well do a university?s ?expendable assets? cover its annual expenses? Expendable assets are defined as total unrestricted net assets, plus temporarily restricted net assets plus debt related to property, plant and equipment, minus property, plant and equipment net of accumulated distribution, divided by total annual expenses. ?Full credit was awarded to schools with ratios of more than 2.0, or two years.

Viability Ratio (10%) – This is similar to the primary reserve ratio but it measures the amount of expendable assets a college has relative to its debt load. ?Many colleges carry no debt and therefore received full credit. ?Any college that has more than two years of assets to debt coverage got full credit.

Core Operating Margin (10%) – This measures sheer operating profit, otherwise known as ?surplus.? We looked at essential or core revenues for education, as measured by the DOE, minus core expenses. In other words, is college meeting its obligations, like instruction expenses, student service etc, from the tuition, grants, gifts, contracts and investment revenue it takes in. Generally speaking schools with over 50% operating margins got full credit but half credit was awarded to those core operating margins of at least 10%.5.

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