This percentage compares the level of debt service (principal and interest payments) with the institution’s operating expense, thereby measuring an organization’s reliance on debt as a source for financing its mission. Higher percentage indicate fewer resources being available for other general operating purposes.
As a measure of the relative cost of debt to overall expenses, a declining trend is generally desirable. The percentage can spike during times of specific funding activity. Investment bankers set an upper threshold of 7% for this percentage.
The numerator includes required principal and interest payments (plus any other required additions to reserves or renewal and replacement fund), as reported on the Statement of Cash Flows. The denominator is total operating expenses, as reported on the Statement of Revenues, Expenses, and Changes in Net Position.
|
Year |
Ratio |
|
2022 |
4.58% |
|
2021 |
4.80% |
|
2020 |
5.80% |
|
2019 |
5.45% |
|
2018 |
5.67% |