Results of 2018 Audits: Universities

Tabled: 30 May 2019

Appendix E. Financial and non-financial sustainability indicators

Figure E1 shows financial and non-financial sustainability indicators used to assess the financial sustainability risks of universities. These indicators should be considered collectively and are more useful when assessed over time as part of a trend analysis.

Our analysis of financial sustainability risk in this report reflects on the position of each university.

Figure E1
Financial and non-financial sustainability indicators, formulas and descriptions

Indicator

Formula

Description

Net result margin (%)

Net result/Total revenue

A positive result indicates a surplus, and the larger the percentage, the stronger the result. A negative result indicates a deficit. Operating deficits cannot be sustained in the long term.

The net result and total revenue are obtained from the comprehensive operating statement.

The adjusted net result margin is the net result margin adjusted for the one-off accounting changes introduced by AASB 9 in 2018.

Liquidity (ratio)

Current assets/ Current liabilities

This measures the ability to pay existing liabilities in the next 12 months.

A ratio of one or more means that there are more cash and liquid assets than short-term liabilities

Adjusted liquidity (ratio)

(Current assets + Non-current financial investments)/ Current liabilities

Liquidity ratio adjusted to include non-current financial investments, since most of these can be converted to cash or cash equivalents at short notice and are available to the universities to meet any liabilities if required.

The ratio should ideally be above 1, indicating that there are sufficient liquid assets to meet short-term liabilities.

Capital replacement (ratio)

Cash outflows for property, plant and equipment/ Depreciation

Comparison of the rate of spending on infrastructure with its depreciation. Ratios higher than 1:1 indicate that spending is faster than the depreciating rate.

This is a long-term indicator, as capital expenditure can be deferred in the short term if there are insufficient funds available from operations and borrowing is not an option. Cash outflows for infrastructure are taken from the cashflow statement. Depreciation is taken from the comprehensive operating statement.

Internal financing (%)

Net operating cashflow/Net capital expenditure

This measures the ability of an entity to finance capital works from generated cashflow.

The higher the percentage, the greater the ability for the entity to finance capital works from their own funds.

Net operating cashflows and net capital expenditure are obtained from the cashflow statement.

Note: The internal financing ratio cannot be less than zero. Where a calculation has produced a negative result, this has been rounded up to 0 per cent.

Debt to equity (%)

Total borrowings/ Equity

This measures the reliance on debt as a source of funding. A higher ratio indicates greater reliance on debt and an increased risk of insolvency.

Cost of debt (%)

Finance costs/Total borrowings

This measures the effective rate of interest and other costs paid on borrowings.

Employee benefits ratio (%)

Employee expenses/ Total revenue

This measures how efficiently each university uses its staff to deliver revenue-generating services.

Generally, a smaller ratio indicates a more efficient and sustainable workforce.

Repairs and maintenance to depreciation (%)

Repairs and maintenance expenses /Depreciation

This measures the rate of assets being replaced or renewed.

Generally, a ratio above 100 per cent indicates long-term assets are being adequately renewed.

Effective full-time student load (EFTSL) to employee full-time equivalent (FTE) (ratio)

Total EFTSL/Total FTE employees

This measures the adequacy of available resources per student load.

Employee expenses per EFTSL (ratio)

Employee expenses/ Total EFTSL

This measures the cost of employees per student.

Generally, a smaller ratio indicates greater cost efficiency.

Operating expenses per EFTSL (ratio)

Operating expenses/ Total EFTSL

This measures the operational cost per student.

Generally, a smaller ratio indicates greater cost efficiency.

Source: VAGO.

Financial and non-financial sustainability analysis results

Figures E2 to E9 show the financial and non-financial sustainability indicators for each university and its controlled entities (each consolidated university), for the financial years ended 31 December 2014 to 31 December 2018.

Figure E2
Deakin University

 

2014

2015

2016

2017

2018

Net result margin

7.04%

7.16%

5.10%

9.72%

4.40%

Adjusted net result margin

N/A

N/A

N/A

N/A

7.42%

Liquidity

1.26

1.28

0.93

0.96

0.77

Adjusted liquidity

2.05

2.14

2.02

2.10

2.05

Capital replacement

1.05

1.42

2.01

1.61

1.84

Internal financing

215%

165%

110%

145%

126%

Debt to equity

0.00%

N/A

N/A

N/A

#N/A

Cost of debt

N/A

N/A

N/A

N/A

N/A

Employee benefits ratio

56.06%

54.19%

56.50%

54.07%

55.24%

Repairs and maintenance to depreciation

69.14%

61.54%

63.81%

54.27%

54.98%

EFTSL to Employee FTE

8.75

8.79

8.39

8.45

8.03

EFTSL ($'000)

14.20

13.86

15.10

15.38

16.39

Operating expenses per EFTSL ($'000)

21.53

21.44

23.22

23.36

25.37

Source: VAGO.

 

Figure E3
Federation University Australia

 

2014

2015

2016

2017

2018

Net result margin

1.02%

2.33%

0.20%

-2.54%

2.00%

Adjusted net result margin

N/A

N/A

N/A

N/A

2.00%

Liquidity

2.64

3.18

2.78

2.36

1.76

Adjusted liquidity

2.65

3.31

4.05

3.91

3.18

Capital replacement

0.46

0.50

0.48

1.26

1.52

Internal financing

369%

206%

12%

25%

166%

Debt to equity

0.16%

0.03%

N/A

N/A

#N/A

Cost of debt

9.17%

18.90%

N/A

N/A

N/A

Employee benefits ratio

49.22%

47.33%

57.05%

59.99%

48.03%

Repairs and maintenance to depreciation

82.25%

62.49%

35.62%

50.11%

44.13%

EFTSL to Employee FTE

9.57

10.06

8.56

8.52

10.65

expenses per EFTSL ($'000)

10.71

10.17

12.98

14.46

11.57

Operating expenses per EFTSL ($'000)

19.54

19.60

21.28

23.20

22.28

Note: EFTSL for the calculation of the above ratios where relevant, includes vocational education (VE) student loads.
Source: VAGO.

 

Figure E4
La Trobe University

 

2014

2015

2016

2017

2018

Net result margin

2.70%

8.85%

5.10%

3.77%

3.76%

Adjusted net result margin

N/A

N/A

N/A

N/A

3.62%

Liquidity

1.02

0.99

0.78

0.62

0.66

Adjusted liquidity

1.28

1.39

1.15

1.01

1.09

Capital replacement

1.52

1.63

2.30

2.11

1.72

Internal financing

159%

111%

87%

101%

103%

Debt to equity

9.78%

4.84%

4.64%

4.06%

#N/A

Cost of debt

7.72%

14.63%

6.09%

5.29%

4.28%

Employee benefits ratio

58.40%

49.21%

52.19%

54.44%

52.89%

Repairs and maintenance to depreciation

23.92%

26.50%

23.00%

22.83%

23.73%

EFTSL to Employee FTE

8.53

9.06

9.35

9.08

9.22

expenses per EFTSL ($'000)

14.32

12.59

13.31

14.18

14.36

Operating expenses per EFTSL ($'000)

21.55

20.80

21.67

22.64

23.61

Source: VAGO.

 

Figure E5
Monash University

 

2014

2015

2016

2017

2018

Net result margin

10.73%

7.98%

7.80%

5.97%

6.06%

Adjusted net result margin

N/A

N/A

N/A

N/A

8.95%

Liquidity

0.42

0.47

0.35

0.40

0.56

Adjusted liquidity

1.69

1.75

1.48

1.70

1.86

Capital replacement

2.23

3.13

3.16

3.47

2.42

Internal financing

110%

82%

86%

59%

87%

Debt to equity

11.45%

15.93%

17.46%

23.78%

#N/A

Cost of debt

7.59%

5.87%

5.44%

5.03%

4.94%

Employee benefits ratio

47.00%

48.35%

48.02%

48.81%

46.73%

Repairs and maintenance to depreciation

46.43%

35.32%

37.73%

38.31%

33.21%

EFTSL to Employee FTE

7.29

7.49

7.41

7.31

7.64

expenses per EFTSL ($'000)

16.20

15.94

16.38

17.08

17.36

Operating expenses per EFTSL ($'000)

28.51

28.10

29.04

30.51

31.39

Note: EFTSL for the calculation of the above ratios where relevant, includes student loads for significant operations within the Monash University Group.
Source: VAGO.

 

Figure E6
RMIT University

 

2014

2015

2016

2017

2018

Net result margin

6.78%

5.81%

7.62%

5.43%

6.21%

Adjusted net result margin

N/A

N/A

N/A

N/A

6.65%

Liquidity

0.59

0.59

0.53

0.53

0.48

Adjusted liquidity

0.75

0.83

0.77

0.80

0.77

Capital replacement

2.35

3.35

2.84

2.60

1.67

Internal financing

99%

69%

93%

69%

121%

Debt to equity

6.86%

11.78%

11.94%

13.42%

#N/A

Cost of debt

5.33%

3.18%

2.97%

2.59%

3.95%

Employee benefits ratio

56.38%

56.96%

55.23%

56.14%

55.45%

Repairs and maintenance to depreciation

32.80%

34.17%

51.03%

22.85%

19.62%

EFTSL to Employee FTE

11.25

11.06

11.12

11.03

10.80

expenses per EFTSL ($'000)

11.32

12.11

12.13

12.60

13.26

Operating expenses per EFTSL ($'000)

17.40

18.42

18.67

19.35

20.17

Note: EFTSL for the calculation of the above ratios, where relevant, includes student loads from VE and other significant operations within the RMIT University Group.
Source: VAGO.

 

Figure E7
Swinburne University of Technology

 

2014

2015

2016

2017

2018

Net result margin

2.38%

2.71%

3.25%

15.60%

-1.13%

Adjusted net result margin

N/A

N/A

N/A

N/A

0.97%

Liquidity

1.27

1.28

0.90

0.90

0.87

Adjusted liquidity

2.07

2.20

2.40

2.67

2.27

Capital replacement

1.22

0.48

0.44

1.83

1.56

Internal financing

172%

393%

545%

118%

21%

Debt to equity

N/A

N/A

N/A

N/A

#N/A

Cost of debt

N/A

N/A

N/A

N/A

N/A

Employee benefits ratio

52.83%

49.11%

48.34%

45.06%

53.79%

Repairs and maintenance to depreciation

41.77%

45.59%

40.77%

43.17%

35.88%

EFTSL to Employee FTE

12.34

12.67

13.36

13.25

12.16

Employee expenses per EFTSL ($'000)

9.50

9.24

9.50

10.31

11.50

Operating expenses per EFTSL ($'000)

16.41

16.90

17.74

18.34

20.07

Note: EFTSL for the calculation of the above ratios, where relevant, includes student loads from VE.
Source: VAGO.

 

Figure E8
The University of Melbourne

 

2014

2015

2016

2017

2018

Net result margin

7.59%

6.58%

7.39%

9.33%

3.26%

Adjusted net result margin

N/A

N/A

N/A

N/A

7.77%

Liquidity

0.81

1.10

1.38

1.61

1.87

Adjusted liquidity

4.14

4.78

4.92

5.65

5.72

Capital replacement

1.46

1.41

1.15

1.58

2.88

Internal financing

95%

170%

256%

320%

209%

Debt to equity

6.16%

6.46%

11.02%

10.49%

#N/A

Cost of debt

12.82%

4.31%

4.52%

4.49%

4.95%

Employee benefits ratio

49.79%

49.79%

48.88%

47.39%

48.99%

Repairs and maintenance to depreciation

35.83%

48.91%

65.86%

51.69%

55.98%

EFTSL to Employee FTE

5.40

5.77

5.87

5.88

5.87

Employee expenses per EFTSL ($'000)

25.75

23.90

23.91

24.57

25.36

Operating expenses per EFTSL ($'000)

42.95

41.37

41.74

43.32

44.45

Source: VAGO.

 

Figure E9
Victoria University

 

2014

2015

2016

2017

2018

Net result margin

-3.64%

-2.81%

-2.52%

-6.57%

1.53%

Adjusted net result margin

N/A

N/A

N/A

N/A

1.72%

Liquidity

1.27

1.26

0.68

0.71

1.05

Adjusted liquidity

1.29

1.28

1.26

0.89

1.95

Capital replacement

1.47

0.74

0.82

1.30

1.67

Internal financing

279%

151%

109%

51%

57%

Debt to equity

N/A

N/A

0.07%

0.04%

#N/A

Cost of debt

N/A

N/A

77.93%

173.16%

4.04%

Employee benefits ratio

68.42%

67.52%

64.77%

68.05%

58.67%

Repairs and maintenance to depreciation

65.73%

59.22%

54.98%

76.99%

57.27%

EFTSL to Employee FTE

13.09

13.12

12.75

13.42

13.53

Employee expenses per EFTSL ($'000)

9.89

10.20

10.31

11.18

9.85

Operating expenses per EFTSL ($'000)

13.97

14.45

15.02

16.18

14.80

Note: EFTSL for the calculation of the above ratios, where relevant, includes student loads from VE.
Source: VAGO.

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