The Financial And Operational Health Of A New 100 Bed Residence Facility

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Overview Allegheny College, a small liberal arts college in western Pennsylvania is about to issue $12 million in debt for a new 100-bed residence facility. In this memo, we review the financial and operational health of this college by analyzing significant financial ratios. Additionally, we offer a comparison of these ratios to those of Colgate University’s, a critique of the strengths and weaknesses of this organization, and recommendations for a more enduring future. Opinion We at Moody’s Investor Services, assign a rating of AAA to Allegheny College’s $12 million bond due to a promising financial performance reflected in the audited financial statement of FY2009. Mission The mission of an educational institution reflects its…show more content…
The tuition dependency ratio, which represents the reliance of the institution on revenue generated from tuition, is relatively small for Allegheny College as compared to Colgate University. The ratios of 49% and 51% for Allegheny College and Colgate University respectably, show a well-balanced dependence on tuition. It can be inferred that financial downturns and occasional drop in student enrollment would not severely preclude operations. With a strong student demand reflecting in the enrollment figures, we find the relatively high tuition discount ratio of 44% belonging to Allegheny College concerning. As compared to 31% of tuition discount provided by Colgate University, Allegheny College’s higher percentage reflects that they are giving out many scholarships and aid from their earned revenue in order to attracted applicants. Colgate University, on the other hand, establishes itself as a reputable brand and does not need to rely as heavily on offering scholarships to students in order to keep the student demand high. Scope of Operations An analysis of operating performance shows the institution’s ability to maintain a healthy financial performance in the long run. For investors, operating margin is one of the most important indicators of security. The operating margin for Allegheny College is 9.79% as compared to 0.1% for Colgate University. This ratio shows that amount of operating surplus as a fraction of the operating revenues. Colgate
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