Post by Rogobob77 on Mar 9, 2022 14:02:18 GMT -5
In an effort to determine the financial health of private colleges as they emerge from the pandemic, Forbes crunched the numbers for its annual college financial grades, which measures the balance sheet health and operating strength of 921 private, not-for-profit colleges with full-time enrollments greater than 500 students. The findings were published in an article entitled “College Financial Grades 2021: Will Your Alma Mater Survive Covid.”
Forbes College Financial Grades are based on the following nine components:
1. Endowment Assets Per FTE (15%): This measures schools’ endowment assets at year end per full-time equivalent student. Princeton has more than $3.1 million per student, and no other school tops $2 million. Fifty-one schools received full credit in this category, capped by Scripps College with $342,000 in its endowment per student.
2. Primary Reserve Ratio (15%): This ratio broadly measures a college’s liquidity, grading how well its expendable assets could meet its annual expenses without straining its normal operations. 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 depreciation, divided by total annual expenses. Grinnell College, a small college in Iowa with a $2 billion endowment thanks in part to Warren Buffett’s investment advice, has a ratio over 15, meaning it could cover 15 years of expenses with its existing assets. By contrast, Indiana’s Butler University, which scores a grade of C-plus, has a ratio of 1.0. Any college with a ratio of at least 2.4 received full credit.
3. Viability Ratio (10%): This metric analyzes a college’s expendable assets divided by its debt load, similar to the primary reserve ratio’s measurement relative to annual expenses. Schools with no debt received full credit, as did any college with a ratio of at least 2.6. Vanderbilt’s relatively small debt load gives it a viability ratio of 14.5, among the highest of colleges that carry any debt. New York University, saddled with $4.6 billion in debt, has a viability ratio of only 0.48.
4. Core Operating Margin (10%): This measures whether tuition, donations and investment revenues cover a college’s educational expenses by subtracting its core expenses from its core revenues and dividing the difference by its core revenues. Williams College has a comfortable surplus, with a 57% operating margin. About one third of the 921 schools ranked, including the University of Miami and the University of Southern California, had negative margins, with expenses exceeding revenues.
5. Tuition As A Percentage of Core Revenues (15%): Diversified revenue streams make any organization more financially secure, and colleges are no different. Schools that get the lion’s share of their revenue from tuition are more vulnerable to enrollment declines and price competition. Tuition accounts for less than 10% of revenues at only 11 colleges, including Yale, Stanford and the Massachusetts Institute of Technology. Princeton again takes the top spot, relying on tuition for only 3% of its core revenues.
6. Return On Assets (10%): This metric divides a college’s change in net assets during the year by its assets at the beginning of the year. Full credit went to 28 colleges with at least a 23% return, including Oglethorpe, while net assets shrunk at 159 other schools.
7. Admissions Yield (10%): Any college would prefer to be an applicant’s first choice than their safety school. Admissions yield measures the percentage of accepted students who choose to attend, and a higher number is a sign of a healthy enrollment. Harvard had an 82% yield for its 2019-20 freshman class—very few high schoolers turn down an opportunity to enroll there. Any school with a yield of at least 52% received full credit.
8. Percent Of Freshmen Getting Grant Aid (7.5%): Colleges that hand out scholarships and grants to a large chunk of their incoming freshmen may be wealthy and generous, but an unusually high percentage here is often more indicative of desperation to entice students to enroll. Every school needs a cohort of well-heeled families paying the full sticker price to boost their coffers. Any college where this is less than 40%, like Tufts University and Wake Forest University, receives full credit, but colleges like DePauw University or Baylor University, where at least 90% of incoming freshmen receive aid, get at most half credit.
9. Instruction Expenses Per FTE (7.5%): This measures how much schools actually spend on educating each student. A higher amount reflects a college able to invest in its core purpose. Washington University in St. Louis spends the most per student at $128,000, and 15 colleges spend at least $45,000 per student to get full credit, including five Ivy League schools.
I pulled some individual schools out of the data set to see how Detroit Mercy compares with other private schools of interest. I tried to include a good number of D-1 basketball schools as I think the financial strength of an institution is very relevant to the practical realities of joining higher profile conferences. As you can see from this ordered list, UDM does not fare all that well.
4.50 = A+ to .50 = F
Notre Dame 4.5
Holy Cross 4.32
Boston College 3.92
Villanova 3.61
Xavier (La) 3.54
Santa Clara 3.44
Georgetown 3.31
St. Louis 3.31
San Diego 3.17
Dayton 3.14
John Carroll 3.08
Creighton 2.99
Marist 2.67
Duquesne 2.62
San Francisco 2.61
Albion 2.61
Loyola (MD) 2.59
Quinnipiac 2.59
St. John’s 2.57
Manhattan 2.53
Aquinas 2.47
Butler 2.42
Gonzaga 2.37
Xavier 2.37
DePaul 2.37
Iona 2.37
Bradley 2.32
Marquette 2.3
Madonna 2.3
Fairfield 2.17
Monmouth 1.96
Niagara 1.94
Fordham 1.92
St. Peters 1.72
Siena 1.71
Lawrence Tech 1.69
Cabrini 1.66 (C-)
Rider 1.65
Providence 1.63
Canisius 1.6
Bellarmine 1.54
Detroit Mercy 1.46 (D)
St. Thomas 1.45
Robert Morris 1.38
LaSalle 1.36 (I believe this is lowest ranked school with D-1 athletics)
Adrian .9
Here’s a link to the full article from Forbes as well as a database with all 921 schools’ scores/grades:
www.forbes.com/sites/schifrin/2021/02/22/college-financial-grades-2021-will-your-alma-mater-survive-covid/?sh=661cc4d49163
The Detroit Mercy score in Forbes 2019 report was 1.48; in 2016 it was 1.775. Trending in the wrong direction during the last few years.
Forbes College Financial Grades are based on the following nine components:
1. Endowment Assets Per FTE (15%): This measures schools’ endowment assets at year end per full-time equivalent student. Princeton has more than $3.1 million per student, and no other school tops $2 million. Fifty-one schools received full credit in this category, capped by Scripps College with $342,000 in its endowment per student.
2. Primary Reserve Ratio (15%): This ratio broadly measures a college’s liquidity, grading how well its expendable assets could meet its annual expenses without straining its normal operations. 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 depreciation, divided by total annual expenses. Grinnell College, a small college in Iowa with a $2 billion endowment thanks in part to Warren Buffett’s investment advice, has a ratio over 15, meaning it could cover 15 years of expenses with its existing assets. By contrast, Indiana’s Butler University, which scores a grade of C-plus, has a ratio of 1.0. Any college with a ratio of at least 2.4 received full credit.
3. Viability Ratio (10%): This metric analyzes a college’s expendable assets divided by its debt load, similar to the primary reserve ratio’s measurement relative to annual expenses. Schools with no debt received full credit, as did any college with a ratio of at least 2.6. Vanderbilt’s relatively small debt load gives it a viability ratio of 14.5, among the highest of colleges that carry any debt. New York University, saddled with $4.6 billion in debt, has a viability ratio of only 0.48.
4. Core Operating Margin (10%): This measures whether tuition, donations and investment revenues cover a college’s educational expenses by subtracting its core expenses from its core revenues and dividing the difference by its core revenues. Williams College has a comfortable surplus, with a 57% operating margin. About one third of the 921 schools ranked, including the University of Miami and the University of Southern California, had negative margins, with expenses exceeding revenues.
5. Tuition As A Percentage of Core Revenues (15%): Diversified revenue streams make any organization more financially secure, and colleges are no different. Schools that get the lion’s share of their revenue from tuition are more vulnerable to enrollment declines and price competition. Tuition accounts for less than 10% of revenues at only 11 colleges, including Yale, Stanford and the Massachusetts Institute of Technology. Princeton again takes the top spot, relying on tuition for only 3% of its core revenues.
6. Return On Assets (10%): This metric divides a college’s change in net assets during the year by its assets at the beginning of the year. Full credit went to 28 colleges with at least a 23% return, including Oglethorpe, while net assets shrunk at 159 other schools.
7. Admissions Yield (10%): Any college would prefer to be an applicant’s first choice than their safety school. Admissions yield measures the percentage of accepted students who choose to attend, and a higher number is a sign of a healthy enrollment. Harvard had an 82% yield for its 2019-20 freshman class—very few high schoolers turn down an opportunity to enroll there. Any school with a yield of at least 52% received full credit.
8. Percent Of Freshmen Getting Grant Aid (7.5%): Colleges that hand out scholarships and grants to a large chunk of their incoming freshmen may be wealthy and generous, but an unusually high percentage here is often more indicative of desperation to entice students to enroll. Every school needs a cohort of well-heeled families paying the full sticker price to boost their coffers. Any college where this is less than 40%, like Tufts University and Wake Forest University, receives full credit, but colleges like DePauw University or Baylor University, where at least 90% of incoming freshmen receive aid, get at most half credit.
9. Instruction Expenses Per FTE (7.5%): This measures how much schools actually spend on educating each student. A higher amount reflects a college able to invest in its core purpose. Washington University in St. Louis spends the most per student at $128,000, and 15 colleges spend at least $45,000 per student to get full credit, including five Ivy League schools.
I pulled some individual schools out of the data set to see how Detroit Mercy compares with other private schools of interest. I tried to include a good number of D-1 basketball schools as I think the financial strength of an institution is very relevant to the practical realities of joining higher profile conferences. As you can see from this ordered list, UDM does not fare all that well.
4.50 = A+ to .50 = F
Notre Dame 4.5
Holy Cross 4.32
Boston College 3.92
Villanova 3.61
Xavier (La) 3.54
Santa Clara 3.44
Georgetown 3.31
St. Louis 3.31
San Diego 3.17
Dayton 3.14
John Carroll 3.08
Creighton 2.99
Marist 2.67
Duquesne 2.62
San Francisco 2.61
Albion 2.61
Loyola (MD) 2.59
Quinnipiac 2.59
St. John’s 2.57
Manhattan 2.53
Aquinas 2.47
Butler 2.42
Gonzaga 2.37
Xavier 2.37
DePaul 2.37
Iona 2.37
Bradley 2.32
Marquette 2.3
Madonna 2.3
Fairfield 2.17
Monmouth 1.96
Niagara 1.94
Fordham 1.92
St. Peters 1.72
Siena 1.71
Lawrence Tech 1.69
Cabrini 1.66 (C-)
Rider 1.65
Providence 1.63
Canisius 1.6
Bellarmine 1.54
Detroit Mercy 1.46 (D)
St. Thomas 1.45
Robert Morris 1.38
LaSalle 1.36 (I believe this is lowest ranked school with D-1 athletics)
Adrian .9
Here’s a link to the full article from Forbes as well as a database with all 921 schools’ scores/grades:
www.forbes.com/sites/schifrin/2021/02/22/college-financial-grades-2021-will-your-alma-mater-survive-covid/?sh=661cc4d49163
The Detroit Mercy score in Forbes 2019 report was 1.48; in 2016 it was 1.775. Trending in the wrong direction during the last few years.