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 cost per faculty

TSPF total salaries paid to faculty
TFTE total full time equivalent
FTEF 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 = [--------------] x FTEA
TFTEA

CPA cost per administrator

TSPA total salaries paid to administrators
TFTEA total FTE rendered by administrators
FTEA total FTE rendered by a particular
administrator
Cost Per Student

TOE
CPSH = [----------]
TCH

CPSH cost per student per hour

TOE total operating expenses
TCH total contact hours
 Cost 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 room
TH 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 = ------ - 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
 EVA 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
EVA 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
 EVA 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
 EVA of Room
TAPR
EVAR = --------- - CPRH
THU

EVAR economic value added of room

TAPR 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
 EVA 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