APPENDIX 7CCREDIT RATING AGENCIES AND DOE RATIOS

Education organizations have a number of specialized financial ratios by which they are evaluated. Bond rating agencies and the U.S. Department of Education (DOE) use these specialized ratios in order to assess creditworthiness. Many of these were developed originally by accounting firm Peat Marwick, now part of KPMG LLP. Bank lenders may also use some of these ratios in evaluating your loan requests. We include here a summary done by Fischer, Gordon, Greenlee, and Keating, as well as website information for your further study.

In Exhibit 7C.1, note the key ratios that the DOE, KPMG, and the three largest ratings agencies (S&P, Moody's, and Fitch) use in their analysis of private colleges and universities. Exhibit 7C.2 gives the definitions of the items in the ratio numerators and denominators. We begin our presentation by providing the web addresses for the three nationally recognized statistical ratings organizations (NRSROs) rating nonprofits' debt issues in the United States.

Liquidity Ratios Operating Performance Ratios Debt and Leverage Ratio
US Department of Education images images images
KPMG et al. (1999)
Standard&Poor's (2002a) ...

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