The universities increased their fees to £3, 000 a year in September 2006. The previous fees that the student paid was lower and the previous government had promised not to make further increments until the year of 2009. A coalition government was in power in the year 2010 and new changes in the education sector occurred. The government promised to reform the higher education finance and system. In November 2010 the government raise concerns that focused on their intentions to raise the tuition fees in the year 2012 from £ 3, 000 to £ 6,000 and even higher in exceptional cases (Douglass, 2005).
Many years have passed and the many transformations occurred in the United Kingdom higher education sector. The best universities will charge more fees at an alarming rate of more than £ 9,000 in a year. The universities with the highest ranking in terms of their teaching quality, employment outcomes and student satisfaction will raise their fees. The increase in the fees will be in line with the rate of inflation (Marginson & Van der Wende, 2007).
As new elections take place, the conservative might raise fees to £11, 500 though nobody acknowledges this opinion. The rise in fees will depend on the university position in terms of their attractiveness (Emons & Garoupa, (n.d.). Some of the universities will be in a position to show the society that the market allows them to charge very high fees (Pennell & West, 2005). On the other side, others will face challenges of proving the money they charge is worth their ranking. A higher cap above £ 9,000 will do more marketing for the universities (Deem et al., 2007).
The science and engineering project will enable more people to get access to financial supports that will enable then train in engineering during the part time hours (Peters et al., 2009). As more people get access to the education the business will and the economy will improve, enabling the country to stay ahead globally. The Higher Education Funding Council for England will administer the funds (Bezhani, 2010).
The universities are responsible for providing higher levels of skills in the society. (The teaching and trainings offered at the universities determine the quality of skills in the society and businesses. In addition, the universities play a major role in research sector of an economy. Research and development drive innovation among in the economies Universities influence the growth of economies by encouraging entrepreneurship and development of businesses, investment attractions and talent growth. In addition, university educations increases job creation due to quality skills and innovation ( Smith & Naylor, 2001).In order to meet the skills need in the UK market more measures need to be factored (Dearden et al., 2011).
Universities use various tools to market them and one of the tools involved is use of architecture. The Oxford University and Massachusetts Institute of Technology use architecture to attract more students (Liebscher & Oesterreichische Nationalbank, 2004).The buildings mean many students in the universities who are mainly the youths. The use of architecture is a symbol of how the universities use architecture to sell themselves to the students and parents. Previously in UK higher education was state-sponsored and free. The competition in terms of architecture is increasing with the aim of outdoing each other (Wright et al., 2006). The competition is not only in terms of the best halls and classrooms, but also in terms of the best pools, gyms and wellness centres (Binsardi, 2003).
The buildings constructed consist of very magnificent shapes that attack more students globally due to the increase in networking (Slaughter & Rhoades, 2004). The universities get income from the fees paid by the students and the income reinvested to improve the quality of education (Russell, 2005). Many institutions have changed their strategies to fund the capital investment due to the reduction in grants (Hayʼat Markaz Qaṭar lil-Māl. 2011). Some of the suggested sources of funds include borrowings from the bank, bond issuance, margins between expenditures and income and generation of enough operating cash flows among others. The funding from the internal sources implies raise in the student fees will increase cash inflows (Barr, 2004).
Some of the financial institutions lack confidence with the institutions since the amount borrowed is high and its repayment extends for a longer period. The financing of the capital investment from internal cash has increased over the years with an increase in fees (Shephard, 2010). Higher education institutions have turned to internal financing from the market forces presents some higher interest rate that increases levels of debts (Beach et al., 2005).
Capital Investment Fund
Capital investment in the education sector is important since it enhances research and development and improves skills and quality of education offered to students. It is important to invest more in higher education since talents growth and innovation starts with skills gained at the universities .The majority of the universities in the world has increased the fees in order to cover the inadequate funding of the capital investments. Complex learning halls are important since they increase the number of enrolments and quality of education. Internal funding is important since they reduce the debt level and costs of external debts (Huang & Wiseman, 2011).
Many students will get enrollment in higher education institutions due to lack of fees that have increased over time. Many do not attend school at all, while others drop out due to lack of further finance. The reduction in enrolling a student suggests that lesser students will gain skills a quality education to increase levels of innovation (Berman et al., 2006).The income and expenditure accounts enable the universities to determine whether it can finance its projects internally or it will require external sources of finance. Ratios measure various performances of the organization in terms of profitability and liquidity among others (Wehner, 2010).
University of Oxford Consolidated Income and Expenditure
Year ended 31 July 2010 £’m 2011 £’m 2012 £’m 2013 £’m 2014 £’m
Funding body grants 203.0 200.3 203.6 193.8 182.2
Academic fees and support grants 137.3 152.7 173.3 197.0 235.9
Research grants and contracts 367.0 376.7 409.0 436.8 478.3
Other income 165.8 370.7 191.0 203.0 213.2
Endowment and investment income 28.3 21.5 25.6 27.8 30.3
Profit on sale of Natural Motion – – – – 33.6
Donation of heritage assets 0.2 0.2 0.3 28.5 0.9
Total Income 901.6 1,122.1 1,002.8 1,086.9 1, 174.4
Total Expenditure 884.4 908.2 971.8 1,037.4 1,146.3
Surplus on ordinary activities 17.2 213.9 31.0 49.5 28.1
Surplus or the year retained within
General Reserves 27.8 217.9 39.0 60.7 38.9
Net cash (outflow)/inflow before
Management of liquid resources (17.3) (49.9) 54, 9 (77.4) 10.6
University of Nottingham Consolidated Income and Expenditure Account
INCOME 2014£’m 2013£’m 2012£’m
Funding body grants 110.0 125.0 139.3
Tuition fees and education contracts 253.4 220.4 185.2
Research grants and contracts 105.2 111.8 100.1
Other operating income 102.0 102.2 94.5
Endowment and investment income 1.3 1.5 1.2
Total income 571.9 580.9 520.3
Staff costs 301.6 295.2 284.0
Other operating expenses 217.3 216.8 190.5
Depreciation 25.4 24.0 23.8
Interest and other finance cost 1.6 2.5 2.0
Total expenditure 545.9 538.5 500.3
Surplus for the year before associates 26.0 22.4 20.0
The share of (losses) / profits in associated (0.8) (0.4) 3.9
Surplus for the year after associates 25.2 22.0 23.9
Surplus for the year transferred from 0.0 0.2 0.2
Accumulated income in endowment
The net surplus for year retained 25.2 22.2 24.1
There exist two types of control the financial and budgetary control. Most institutes and companies use both controls in their organizations for various reasons. All business activities require budgeting activity to ensure achievement of the objectives. A budget is a financial resource with detailed activities to be involved in a specified time. A budget enables the organization to carry out its activities in a coordinated way (Covaleski et al., 2006).
The Institute of Cost and Management uses budget controls in its financial activities. The Institute is a good example since it carries out the activity throughout its operation. The budget controls and responsibility centres are important since they help in financial management of the organization. CIMA use different types of responsibility centres like expense centre that measures inputs in terms of monetary units (Covaleski et al., 2006).
The revenue centres are also used where output is measured in monetary terms. The profit centres are also important in this organization since they helps in performance measurement in determining the differences between revenues and expenditure. The other important centre involved is the investment centre that involves comparison of the employed assets and output from the operation (Libby & Lindsay, 2007).
Advantages of Budgeting and Budget Control
There are several advantages of budgetary control and budgeting in CIMA the importance is numerous. One of the advantages of budgeting is it enables the management to think more about the future. The future of any business or organization is important than its present. Budget compels the management to focus and plan ahead in order to achieve the set targets and to give the organization direction and purpose. Budget controls facilitate adequate coordination and communication (Andrews, 2006).
Coordination of activities is important in any organization since it enables the management to do a proper evaluation of the output and areas left out unattended. A budget enables the managers to do an appraisal based on the performance of the employees. The actual performance is assessed and measured against the budget (Hofstede, 2012). The controls provision is based on comparison of the actual results and the planned budget. If actual activities reveal departure from the budget the investigations can be done and reasons established. The reasons for the departure are divided into controllable and non-controllable issues (Diamond, 2006).
Moreover, budget helps in establishing remedial actions that enable the organization act in time in case of emergence of variances. Variances are critical in budgeting and control measures are necessary since the variances can affect the financial statement. Improvement of scarce resource allocation is attainable since every aspect is covered when a budget is drafted. Management find budge an effective tool that helps them to manage and save more time that could be utilised in other more complex measures (Ferry & Eckersley 2012).
The budgets importance improves financial statement and affects the organization positively though in some instances they pose some problems. Budgets are tools that management use and at times they can act as bad labour relations if imposed by management with high. The budgets can result in bad recordkeeping if the management puts more pressure on them. Some departments may have issues that involve disputes over resource allocation (Frown et al., 2010).
Mainly the financial allocations may bring in more issues depending on the needs of various departments. Budgets pose difficulties in evaluating personal or individual goals. The possibility of occurrence of waste is present since the managers may put pressure on utilization of the allocated funds to various departments. The management is likely to overestimate the costs involved in case overspending occurs to avoid blame in case of questionable financial statements (Marginson & Ogden, 2005).
In conclusion, university education is important in any given country since it enhances and develops skills of students. The skills gained from the higher learning institutions changes the economy due to rise in innovation and growth of economies. Universities in the UK were previously sponsored by the government and the issue of capital investment was smooth. After the withdrawal of grants to higher education institutions the universities funded their investment plans internally. The increment in the school fees importantly enabled the institution raise funds to finance infrastructures that market the institutions. The budget controls are important since they ensure that maximum yield is attained in an organization.
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There are several types of profitability ratios used in gauging a company`s performance. The ratios involved includes the operating margin, return on the assets, return on the equity, gross profit margin, return on the investment and return on sales.
The gross margin emphasis on the profitability of goods and services calculations involves dividing the gross profit from the net sales and then multiplying by 100:
Gross Margin= Gross Profit/Net Sales*100. It shows the profitability of the goods and services.
Operating Margin= Operating Profit/ Net sale*100. This ratio measures cost incurred in the production of products that are not involved in direct production.
Return on the Assets= Net Income/Assets*100. This ratio measures how a company produces income from its assets.
Return on Equity= Net Income/Shareholder Investment*100. This ratio measures how much a company makes for each pound an investor puts into form of investment.