Question

Explain some of the major differences between public and private university ratio analysis.

Answer 1

Difference between public and private university ratio analysis

There are some of the basic difference between public and private university ratio analysis. They are listed below,

• Budget preparation and planning

Both the public and private universities ratio analysts use the budget as an important tool to estimate the operating functions. In private universities, they mainly focus on revenue and expense to calculate the profit generation and if their profit is too less means they intend to reduce the cost and focus on those tools to which will help to increase their profit. But in public universities, their main focus depends upon the budget only. And based on that budget, if there are some insufficient funds they will cut some of the services to balance it accordingly.

• Financial Objectives

In public universities, their focus would be mainly to meet the budgeted numbers rather than providing a quality service because the financial thing is in the hands of authorizing parties but in the private universities, their main focus is in the maximization of profit by providing the quality services.

• Differences in accounting principles

The public universities always maintain proper bookkeeping and keep an eye on the financial limits and their budgets because the each and every amount spent is sanctioned by legislative bodies whilst in the private universities, they maintain general accounting principles and prepare the balance sheet to estimate its financial stabilization.

Thus, the basic differences between the private and public university ratio analysis are briefly explained.

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