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oa Journal of Contemporary Management - Financial ratios as indicators of financial sustainability at a South African university

Volume 16 Number 2
  • ISSN : 1815-7440

 

Abstract

Managing limited financial resources is an ongoing challenge for financial managers at South African universities, especially with the call to government for free education. This article explores a set of financial ratios as indicators for financial sustainability at South African universities. A comprehensive literature review was undertaken to develop a theoretical framework to evaluate financial sustainability at universities. The proposed theoretical framework included five groups of ratios, namely, financial performance, liquidity, asset management, debt management and reserves ratios. It further included four elements of financial sustainability, namely, strategy, operating sustainability, investment and risk management.

The proposed theoretical framework was empirically-tested, and financial ratios were calculated for one university in South Africa for a period of eight years. The results showed that these ratios could be useful for examining financial sustainability at universities by means of the four identified elements. Financial performance ratios were included in three of the four elements of financial sustainability, namely, strategy, operating sustainability and investments. Reserve ratios, on the other hand, were included in two of the four elements of financial sustainability. Risk management included three groups of ratios, namely, asset management ratios, debt management ratios and liquidity ratios.

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/content/journal/10520/EJC-17686db0c2
2019-07-01
2019-10-17

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