Financial sustainability of private higher education institutions: the case of publicly traded educational institutions

  • Released On
    Thursday, 05 October 2017
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  • DOI
    http://dx.doi.org/10.21511/imfi.14(3).2017.03
  • Article Info
    Volume 14 2017, Issue #3, pp. 25-38
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Public and private education can unlock different doors and help to flood the country with a rising power, sunlight and sustainable development. Hence, this paper argued that there is a need to sustain both public and private higher education. Financial difficulties restrict private higher education from balancing their budget and maintain a balance between a quality education and maximization of shareholders wealth. This paper outlines and analyzes a critical business model for higher education institutions, Dhofar University and Majan College, both of which are publicly traded in Muscat Securities Market. Both the educational institutions are critically examined from profitability, liquidity, long term solvency and asset management perspective using appropriate financial ratios. Five year forecasts of financial statements up to 2021 are estimated to evaluate the financial stability of the two educational institutions. The paper uses Monte Carlo simulation technique to examine the issue of financial sustainability. Overall the finding shows positive financial results for Majan College compared to Dhofar University. The key take away from the analysis is that educational institutions should be funded primarily by equity and not by debt to survive, sustain and provide high quality education.

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    • Figure 1. Dhofar University DSCR: debt service cover ratio – Monte Carlo simulation results
    • Figure 2. Dhofar University current ratio – Monte Carlo simulation results
    • Figure 3. Dhofar University return on equity – Monte Carlo simulation results
    • Figure 4. Dhofar University asset turnover ratio – Monte Carlo simulation results
    • Figure 5. Majan College current ratio – Monte Carlo simulation results
    • Figure 6. Majan College asset turnover ratio – Monte Carlo simulation results
    • Figure 7. Majan College return on equity – Monte Carlo simulation results
    • Table 1. Year of establishment
    • Table 2. Authorized and paid up capital
    • Table 3. Ownership structure
    • Table 4. Five years financial ratios analysis for Dhofar University
    • Table 5. Five years financial ratios analysis for Majan College