STRATEGIC FINANCIAL RATIO ANALYSIS Addresses four key financial ratings factors used by Moody’s to evaluate colleges & universities: Financial Position Operating Performance Debt Position/Leverage Liquidity

STRATEGIC FINANCIAL RATIO ANALYSIS Adopted Moody’s approach for credit analysis of colleges & universities Selected a relevant subset of Moody’s list of ratios Computed Trinity ratios and compared them to: Moody’s Baa medians (lowest investment grade) or Bond Covenant

Cushion Ratio measures the ability to make debt payments with available cash and investments. Cushion Ratio should be > 1. Bond Covenants require 4.0.

Actual Debt Service Coverage Ratio measures the actual coverage of debt payments by annual operations. Actual Debt Service Coverage should be > 1.0 Bond Covenants call for 1:1 minimum

Annual Operating Margin measures the extent to which current-year internally generated resources have contributed to the overall financing of the institution’s operations. The Annual Operating Margin should be positive and have an improving trend.

Debt Service to Operations indicates how much of an institution’s operating expenses are used for making debt service payments. This ratio should be low.

Direct Debt to Total Capitalization measures the portion of the balance sheet covered by debt. This ratio should be lower than the median established.

Viability Ratio measures the availability of expendable net assets to cover debt should the institution need to settle its obligations as of the balance sheet date. A ratio of 1.0 or > indicates that an institution has enough expendable net assets to cover its debt obligations.

Return on Net Assets measures the change in net assets that occurred as a result of the operations of the institution. The Return on Net Assets should be positive and have an improving trend.

Measures the number of days an institution is able to cover its cash operating expenses from Annual Liquidity Annual liquidity times 365 divided by total expenses less depreciation less additional, unusually large non-cash expenses

Measures an institution’s ability to repay its demand debt from its Annual Liquidity Annual Liquidity divided by demand debt

WHAT DOES THIS ALL MEAN? The Good News Financial Ratios are moving in line with the benchmarks. Revenue growth, cost containment and improved accounts receivable balances led to improvement in the Operating Performance Ratios. Debt Ratios continue to be in line with benchmarks. Trinity exceeded the Debt Covenant Ratios. Managerial Financial Imperatives Continued growth in enrollment Continued vigilance over costs Continued emphasis on cash and liquidity availability Continued emphasis on receivables management Continued need to improve endowment Continued focus on strong balance sheet

WHY NOW? “No Room at the Inn” Favorable Interest Rate Environment Low cost of materials Builders need work Strong Trinity financial results