Using the Composite Financial Index as a Self-Benchmarking Tool

The Composite Financial Index (CFI), which was developed for use by institutions of higher education, is a very effective tool for self-benchmarking. While the CFI does permit comparison of scores among institutions, the CFI is also a useful tool to benchmark an institution’s financial health over a period of time. In order to effectively benchmark your institution, the authors recommend that you use at least five years’ worth of data when charting the CFI. This uncovers emerging trends affecting your institution’s financial condition.

The CFI is composed of four ratios (the primary reserve and viability ratios, which are measures of the strength of an institution’s balance sheet; and the return on net assets and net income ratios, which are measures of the results of operations or the income statement). Understanding both inputs and outputs allows users to develop an internal trend analysis of the institution’s financial health.

A few items to focus on when evaluating your CFI as an internal benchmark –

  • Evaluate multi-year declines and understand what contributes to those declines and what you can do to reverse any trends.
  • What is your ability to grow revenue? How do changing demographics or other factors impact your ability to grow revenue?
  • How diverse are your revenue streams?
  • What is the composition of your net assets? How much is expendable?
  • How does your institution use debt? Is it is used strategically to grow revenue?
  • What is your investment in physical plant? How much is funded through fundraising or sources other than operations or debt?
  • At what rate are expenses increasing? Is expense growth outpacing revenue growth?
  • As an institution, does your board of trustees (and other key stakeholders) encourage strategic risk-taking for growth?
  • What is the operating cash flow margin for the institution, as well for each of the academic offerings?

Evaluating these questions, and other factors unique to your institution, could promote more strategic or meaningful dialogues and operating plans that support the long-term viability and sustainability of the institution.

Need help with assessing and interpreting your institution’s CFI score? – Please contact us.

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at [email protected].

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2024 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

our thoughts on
Pell Grant Program Facing Shortfall
2024 Policy Shifts: Essential Updates Every College Should Know
Gainful Employment Disclosures in Higher Education
Protect Your Students, Faculty and Staff: 3 Common Cyber Attack Methods to Watch Out for in 2023
Key Takeaways from the 2023 CUPA-HR Higher Education Employee Retention Survey
The Latest on the NCAA's National NIL Proposal
Register to receive our weekly newsletter with our most recent columns and insights.
Have a question? Ask us!

We’d love to hear from you. Drop us a note, and we’ll respond to you as quickly as possible.

Ask us
contact us
Pittsburgh

This site uses cookies to ensure that we give you the best user experience. Cookies assist in navigation, analyzing traffic and in our marketing efforts as described in our Privacy Policy.

×