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By NARUMON KAEWDUANG AND WAYNE HAMRA

By NARUMON KAEWDUANG AND WAYNE HAMRA. FINANCIAL RATIO ANALYSIS OF SELECTED SEVENTH-DAY ADVENTIST TERTIARY EDUCATIONAL INSTITUTIONS IN SOUTHEAST ASIA. FINANICAL RATIO ANALYSIS. Qualitative Study Compare Financial Health of Higher Educ. Nonprofits

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By NARUMON KAEWDUANG AND WAYNE HAMRA

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  1. By NARUMON KAEWDUANG AND WAYNE HAMRA FINANCIAL RATIO ANALYSIS OF SELECTED SEVENTH-DAY ADVENTIST TERTIARY EDUCATIONAL INSTITUTIONS IN SOUTHEAST ASIA

  2. FINANICAL RATIO ANALYSIS • Qualitative Study • Compare Financial Health of Higher Educ. Nonprofits • Find Potential Benchmarked or Best Practices

  3. RESEARCH QUESTION What Financial Best Practices of Southeast Asian SDA Colleges/ Universities May Be Found From aStudy of Their Financial Ratios?

  4. Financial Ratio Analysis: University A • Liquidity Ratios • Viability Ratios • Operating Ratios Financial Ratio Analysis: University B • Liquidity Ratios • Viability Ratios • Operating Ratios Compare Analyze Analyze Financial Ratio Analysis: University B • Best Practices Financial Ratio Analysis: University A • Best Practices CONCEPTUAL FRAMEWORK

  5. Approximately 19.5 Million Members • Present in 209 Countries Around the World • Has an Integrated Network of More Than 7,500 Schools Worldwide • Enrolls More Than 1.8 Million Students The Denomination Reports (General Facts, 2017)

  6. SOUTHEAST ASIAN REGION, SOUTHERN ASIA-PACIFIC DIVISION (SSD) of SDA SDA Southern Asia-Pacific Region (SSD) Operates 17 Colleges/Universities, 15 in Southeast Asia; Enrollment of 17,683 in 2015-2016 J. Vincente, SSD Education Department (2017)

  7. Adventist Higher Education An important goal of Adventist higher education is to provide Christian educational services. An increase in the number of students enrolled indicates that usage of these services is expanding.

  8. Chabotar (1989), KPMG (1999), & Adventist Higher Education LITERATURE REVIEW

  9. MEASUREMENT TOOLS

  10. MEASUREMENT TOOLS

  11. MEASUREMENT TOOLS

  12. Selected Liquidity Ratios

  13. Selected Viability Ratios

  14. Selected Operating Ratios

  15. Study Findings

  16. Liquidity Ratios

  17. Viability Ratios

  18. Operating Ratios

  19. University A University has tried to maintain its liquidity at an acceptable level by keeping enough cash to pay off its obligations promptly. This may be seen from its Cash Days Available (45.5 Days), which is higher than the suggested benchmark of 30 days. However, its Quick Ratio (1.30) and Current Ratio (1.48) are slightly below their targets of 1.5 and 2.0 respectively.

  20. University A Its income is based primarily on only a single source (student tuition and fees), and these tuition rates are relatively high, both of which put institutional finances at risk if student enrollment declines. Its employees expenses are relatively high (57% of total expenses), with departmental expenses of 13%, depreciation of 14%, and other expenses of 15%. It is significant that when student enrollment goes down, the university must still carry fixed employment costs.

  21. University A Subsidy support from its parent organization is about 11% of total operating expenses, but during 2016, it still faced a loss of -9.6%.

  22. University B University depends on students for 66.3% of its revenue, with departmental sales contributing an additional 31.6% of net operating income. This diversification of revenue sources helps to protect the university from over-reliance on a single source of income, strengthening its financial base as a nonprofit organization.

  23. University B Its Debt-Equity Ratio is a bit high at 12%, but most of this debt is long-term in nature (about 1/2 from Other Liabilities, 1/2 from Inter-Funds Loans Payable). The average remaining useful lives of fixed assets is about 23 years. It spent 13.3% of operating income on maintenance, which is 2 – 3 times higher than its target, and very high compared to the other university.

  24. University B It generated an 8.1% return on its assets, which is 3% higher than the target and four times higher than its sister institution.

  25. Ratio Analysis in Higher Education “Ratio analysis can measure success factors against institution-specific objectives, and then give the institution the tools to improve its financial profile to carry out its vision and mission.” KPMG (1999)

  26. Conclusion The results showed that one university had about twice as many students as the other. The smaller institution had relatively high tuition and fees, but experienced a net loss and declining liquidity. The larger university charged relatively low tuition and fees, but experienced a modest net gain and improving liquidity.

  27. Future Research Studies Future research studies should consider the economic environment when trying to adopt suitable practices from one location to another. Many external factors that lead to differences in the particular financial situation of each institution. For example, rates of compensation are based on the cost of living in each country.

  28. MEASUREMENT CONTROLS Financial Statements Should be for Same Academic Year, Comparable 12-Month Performance Financial Statements Should be Adjusted to Similar Format Convert Amounts into Common Currency

  29. The general ideas from a study, will hopefully be helpful so that managers may find out best practices from other affiliated institutions.

  30. Thank you!

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