Unit Costs

Unit Costs/Unit Revenues Economic Value Added Drivers

Asset Utilization Asset utilization refers to the use of an asset to generate revenue

Accounts receivable turnover ART is a measure of efficiency in the collection of accounts receivable Net Credit Revenue ART = ---------------------------Average receivables = 12 times, ideal turnover > 12 times, no credit revenue is necessary < 12 times, review credit policy

Fixed Assets Turnover Fixed assets turnover is a measure of efficiency in the use of fixed assets to generate revenue Net Revenue FAT = ---------------------------Average Fixed Assets = 1.0 +/- 0.2, is ideal > 1.2, most fixed assets are over utilized < 0.8, most fixed assets are idle

Total Assets Turnover Total assets turnover is a measure of efficiency in the use of assets to generate revenue Net Revenue TAT = -----------------------------Average Total Assets = 1.0 +/- 0.1, is ideal > 1.1, most assets are over utilized < 0.9, most assets are idle

Current Ratio Current ratio measures the ability of the firm to settle its current obligation through its current assets when they are due. Current Assets CR = ---------------------------Current Liabilities = 2.0 +/- 0.2, is ideal > 2.2, some current assets are idle < 1.8, reflects illiquidity or cash deficiency To maintain an ideal level of liquidity: Cash = to one month salary MS = to one month salary as a buffer All excess must be move to long-term investments

Cost Per Faculty TSPF CPF = [ ---------------] x FTEF TFTE CPF TSPF TFTE FTEF

cost per faculty total salaries paid to faculty total full time equivalent total FTE rendered by a particular faculty

Cost Per Employee TSPE CPE = [-------------] x TFTE TFTEE CPE cost per employee TSPE total salaries paid to employees TFTEE total FTE rendered by all employees TFTE total FTE rendered by a particular employee

Cost Per Administrator TSPA CPA = [--------------] TFTEA CPA TSPA TFTEA FTEA

x

FTEA

cost per administrator total salaries paid to administrators total FTE rendered by administrators total FTE rendered by a particular administrator

Cost Per Student TOE CPSH = [----------] TCH CPSH TOE TCH

cost per student per hour total operating expenses total contact hours

Cost Per Room R&M + Util + Depn CPRH = [---------------------------] TH CPRH R&M Util Depn TH

cost per room per hour repairs and maintenance of room cost of utility depreciation cost of room total hours room is used

Cost Per Program TOEP CPP = ----------- x TFETP TFTE CPP cost per program TOEP total operating expenses incurred in all programs TFTE total FTE (units) enrolled in all programs TFETP total FTE in a particular program

EVA per Faculty TS EVAF = -----FTE EVAF TS FTE CPF

- CPF

economic value added of faculty total salaries received by faculty full time equivalent rendered by faculty cost of faculty

Note: EVAF > 0 for a faculty to be considered productive

EVA for Employee TSE EVAE = ------FTE EVAE TSE FTE CPE

-

CPE

economic value added of employee total salary received by employee actual number of hours rendered be employee cost per employee

Note: EVAE > 0 for the employee to be productive

EVA for Administrator TSA EVAA = -------FTE EVAA TSA FTE CAP

-

CAP

economic value of an administrator total salary received by an administrator actual total hours rendered by administrator cost of an administrator

Note: EVAA > 0 for an administrator to be productive

EVA of a Student TF EVAS = ------TUE EVAS TF TUE CPSH

-

CPSH

economic value added of student total fees paid by the student total units enrolled by the student cost per student per hour

Note: EVAS > 0 for a student to be productive

EVA of Room TAPR EVAR = --------THU EVAR TAPR THU CPRH

-

CPRH

economic value added of room total amount paid to use room total hours room is used cost per room per hour

Total fees paid TAPR = -------------------- x No. of times used No. of Classes Note: EVAR > 0 for room to be productive

EVA of Program TRP EVAP = -------- - CPP FTE EVAP TRP FTE CPP

economic value added of program total revenue of program = No. of units enrolled in program x charge per unit total units enrolled in the program cost per program

Note: EVAP > 0 for the program to be productive