Financial Performance on American and Australian Universities
The delivery of educational facilities including the provision of conducive learning environment is among the priorities in higher education institutions worldwide. However, financial capabilities of such learning centers have not been given the much-needed weight. The accounting department should be responsible for ensuring that such facilities are in a stable state regarding finance. Accounting can be defined as the collecting, measuring and evaluating of financial data to give meaningful information. Such information is supposed to be communicated to the respective persons for decision-making purposes. Such performance entails the measuring of achievements about money. It checks on the incomes and the expenses of the institutions or any other organization. Conducting such operations is a critical activity that needs to be monitored continuously together with other procedures at the school.
It portrays the institutions’ financial health. Afterwards, the results can be compared the different colleges of the same kind on the map. United States Universities The education sector in the US is considered an essential entity. Delen et al4 indicate that it is the backbone for future economic growth. Therefore, follow up on the financial condition of such institutions is a mandatory thing. The schools and the authorities rely on such reports to prepare for future upcoming. There has been massive competition witnessed in the industry both locally and internationally raising the alarm on how the institutions should be managed. The owners are not interested in creating revenues for other ventures. Lastly, private for-profit schools have its focus on the underlying returns.
The incomes are then directed to the owners who decide what to do with the money. They engage in other investments through the institution’s profits. Resource Ratios Nuhu5 states that the available ratio of resources is a paramount aspect in analyzing the financial performance of a given company. It was due to substantial debts and the diminishing endowment market values. Liquidity concerns in American Universities Recognizing the achievements of the institutions is critical. They have tried hard to maintain the ever-growing sector. Attaining such statuses requires effort among all the players including the finance department. Mirza S, Javed3 say that accounting records are an essential component in any company because it paves the way for informed decision making towards the achievement of maximum performance.
Fiscal improvements in the United States’ higher learning centers are a difficult undertaking. It requires a keen knowledge and expertise among the financial and administrative departments. It is because the stakes are very high. Step by step advancement can be compared to a hiking task. Thus, change is needed in the identified institutions to guarantee their long-term continuity. Current Ratio It is a familiar term in financial performance management. It indicates whether a given company or institution can be able to pay both long and short-term duties3. It incorporates total assets about the current liabilities. The ratio primarily indicates the present working capital. The financial status of American universities can be determined by use of such proportions about their financial statements.
It takes into consideration the equity of the shareholders. It is expressed regarding asset percentage. It shows the relationship between dependence on borrowing over the available investment. The American Institutions balances it through lending while at the same time accumulating equity through shares. The Equity is usually used when the debt is considered critical and also if the interest charges exceed the expectations1. There is minimal revenue generating undertakings going on including a decline in endowments. Previously, the universities would impose an additional fee to combat the issue. However, there have been pressures on the parents’ side at such economic times. Job security is an issue to them. Therefore, the capability and willingness to handle such increments is a big problem for them.
It is a significant amount that is capable of changing financial situations of such learning environments. In the University of Michigan case, real estate represents a more substantial portion of its available assets in the institution’s balance sheet. Another example is the Pacific Northwest University which has such assets worth 2 billion dollars, but they are unable to make use of it effectively. It is vital for such American Institutions to convert some section of the assets into cash to boost its financial stability. The selling and leasing back can be of great importance on strengthening States institutions’ balance sheet. They indicate the current cash capability of a given institution. Economic factors of the United States have played an essential role in the success of the higher education field6.
It has been growing for thirty years. Its advancements have been noticed all through that period. Most Institutions in the States registered stability in the year 2016. Since my basis is in the America and Australia, I believe it is essential for me to outline an overview of the similar the universities. I will provide oversight of the available schools and then later compare the two countries regarding financial capabilities. The Australian government is profoundly concerned with the situations of its learning institutions. There are regular audits undertaken to trace the growth of such schools. The emphasis is on the cash sector because of its sensitivity. 5 indicating that their available cash resources are sustainable. Net income, equity and reserve ratios of all colleges were calculated and resulted in the above composite value.
The period between 2010 and 2014 saw massive advancements in the Australian education sector8. There was significant growth in the incomes of the universities. An annual increase of approximately 7 million dollars every year during that time was recorded. The higher learning sector in the country has various income generating activities despite having small endowment values compared to the American institution. The inflows can cater for the witnessed liabilities hence boosting their financial performance. Approximately 36 of the universities have a composite score that is greater than 1. The rest have scored between 1 and 1. The ratio shows the overall stability in the sector. However, it can be concluded that the two years provide a clear picture of the liquidity issue. It has dropped in all the three universities.
Apparently, the state of Australian higher education can be categorized as a low-risk area8. A more significant percentage of the institutions can operate without financial constraints. Differences Revenue diversity It is essential to compare the two countries to provide a proper insight of the two regions. Guthrie and Neumann9 argue that endowments can be a better option that is reliable for investments. Thus, they need to focus on the various alternatives for earning revenues. On the other hand, the US central source of cash inflows is the fees paid by the students. Both the tuitions and fee amount to 70 billion dollars of the university incomes. The appropriations by the state and local governments also add funding the colleges. However, there is a variance in the two countries.
The Australian one is relatively lower when compared to the United States. Therefore, the expenditures of the institutions on the financial aid are minimal. Another notable thing from the United States Institutions is their ability to gather aids the alumni. There are annual programs that bring the Alumni together and be able to raise some finance to boost the financial planning of the institution. The findings portrayed the overall trend of such donations about the universities. The market value of the entity went down from the year 2014 from the lowly to highly rated schools. Such figures indicate that the returns from the previous fundraising where unable to meet the required amount. It did not satisfy the needs of the various institutions.
National Association of College and University Business Survey conducted a survey and found out that overall market returns stand out at negative 1. It is a tiny figure comparing it to their United States counterparts. In that matter, such an aggregate amount is only comparable to individual universities in America. Harvard University is one of the top-ranked schools in the world. Its endowments in each year surpass the figure of all the Australian colleges combined. In the 2017 year, the institution registered a value of 35 billion in donations. In Australia, the average net assets in the sector have been consistently stable8. In 2015, it was estimated to be 20 million dollars compared to an approximate value of 4 million dollars on the current liabilities side. The figure is almost five times the combined liabilities.
It indicates how the overall stability of the higher education section is. In both countries, the universities have been increasingly using debts to finance their capital advancements. 5 and one liquidity ratio. Therefore, the United States education sector needs to look keenly into the issue because a majority of the institutes have a figure of below one. The data indicate that the Australian industry is still safe despite the declining trend. They can even meet the obligations that require short term. On the American side, the sector is at risk since many of the schools may fail to meet their short-term financial needs. Such investments generate income afterward. Therefore, the institutions find themselves straining to repay the underlying dues. Public Investment The university education in America and Australia has some similarities regarding finance.
One of the areas is the public injections. In many countries, there has been a trend that the investment from the state and federal government into is continuously reducing each year1. Guthrie and Neumann9 states that it guarantees efficiency and effectiveness in operations. Additionally, it guarantees reliability in the financial reporting. It also ensures that a given institution does not break the laws and regulations on economic matters. In both countries, it is evident that there are common risks associated with some of the balance sheet components. Accounts payables and assets were potential risk areas. The financial statements of such institutions should be keenly monitored to develop mitigating measures where necessary. Australia and the United States universities are among the top in the whole world.
However, it is true that they are facing financial issues that urgent tackling. The liquidity issue is evident in these universities because there has been a decline in the ratio. The findings indicate that such facilities may be having huge debts that if not carefully handled may cause massive problems for our institutions. Available at: http://www. jstor. org/stable/40703586. Mirza S, Javed A. Determinants of financial performance of a firm: Case of Pakistani stock market. org/2642/fbd301fbe3946ed1dd03e27ce83c501aeb09. pdf. Nuhu M. Role of Ratio Analysis in Business Decisions: A Case Study NBC Maiduguri Plant. journal of education and social science. 1002/nml. Montanaro M. The Influence of Financial Performance on Higher Education Academic Quality. Fisher digital publication.
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