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Unit Costs/Unit RevenuesUnit Costs/Unit Revenues

Economic Value Added Drivers

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Asset UtilizationAsset Utilization

Asset utilization refers to the use of an asset

to generate revenue

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Accounts receivable turnoverAccounts 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

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Fixed Assets TurnoverFixed 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

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Total Assets TurnoverTotal 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

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Current RatioCurrent Ratio

Current ratio measures the ability of the firm

to settle its current obligation through its

current assets when they are due.

Current AssetsCR = ----------------------------

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

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Cost Per FacultyCost Per Faculty

TSPF

CPF = [ ---------------] x FTEF

TFTE

CPF cost per faculty

TSPF total salaries paid to faculty

TFTE total full time equivalent

FTEF total FTE rendered by a particularfaculty

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Cost Per EmployeeCost 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 particularemployee

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Cost Per AdministratorCost Per Administrator

TSPA

CPA = [--------------] x FTEA

TFTEA

CPA cost per administrator

TSPA total salaries paid to administrators

TFTEA total FTE rendered by administratorsFTEA total FTE rendered by a particular

administrator

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Cost Per StudentCost Per Student

TOE

CPSH = [----------]

TCH

CPSH cost per student per hour

TOE total operating expensesTCH total contact hours

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Cost Per RoomCost Per Room

R&M + Util + Depn

CPRH = [---------------------------]

TH

CPRH cost per room per hour

R&M repairs and maintenance of room

Util cost of utility

Depn depreciation cost of roomTH total hours room is used

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Cost Per ProgramCost Per Program

TOEP

CPP = ----------- x TFETP

TFTE

CPP cost per program

TOEP total operating expenses incurred in

all programsTFTE total FTE (units) enrolled in all programs

TFETP total FTE in a particular program

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EVA per FacultyEVA per Faculty TS

EVAF = ------ - CPF

FTE

EVAF economic value added of faculty

TS total salaries received by faculty

FTE full time equivalent rendered by

faculty

CPF cost of faculty

Note: EVAF > 0 for a faculty to be considered

productive

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EVA for EmployeeEVA for Employee

TSE

EVAE = ------- - CPE

FTE

EVAE economic value added of employee

TSE total salary received by employee

FTE actual number of hours rendered

be employee

CPE cost per employee

Note: EVAE > 0 for the employee to be

productive

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EVA for AdministratorEVA for Administrator

TSA

EVAA = -------- - CAP

FTE

EVAA economic value of an administrator

TSA total salary received by an administrator

FTE actual total hours rendered by

administrator

CAP cost of an administrator

Note: EVAA > 0 for an administrator to be

productive

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EVA of a StudentEVA of a Student

TF

EVAS = ------- - CPSH

TUE

EVAS economic value added of student

TF total fees paid by the student

TUE total units enrolled by the student

CPSH cost per student per hour

Note: EVAS > 0 for a student to be

productive

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EVA of RoomEVA of Room

TAPREVAR = --------- - CPRH

THU

EVAR economic value added of roomTAPR total amount paid to use room

THU total hours room is used

CPRH 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

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EVA of ProgramEVA of Program TRP

EVAP = -------- - CPP

FTE

EVAP economic value added of program

TRP total revenue of program = No. of units

enrolled in program x charge per unit

FTE total units enrolled in the program

CPP cost per program

Note: EVAP > 0 for the program to be productive