Return on Net Assets
This ratio determines whether the financial position of the University has improved compared to prior years.
Return on Net Assets = Change in Net Assets / Beginning Net Assets
The Change in Net Assets is the difference between the ending and beginning balances of the current fiscal year.
Cornell's Return on Net Assets
Understanding this Ratio
This ratio measures asset performance and helps answer the question:
Is the University effectively managing its assets?
A declining ratio may be appropriate if the University's strategy includes increased expenditures to better fulfill its mission. On the other hand, an improving trend in the ratio indicates that the institution is increasing its overall value (net assets) and is better positioned for future financial flexibility.
It is best to look at the ratio over the long term. It is also important to understand the underlying causes of the change in net assets, as there are volatile factors that can affect net assets such as investment return and investment in plant.