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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 –
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.
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