NVR RTOs (RTOs regulated by ASQA) must meet the requirement detailed in the legislative instrument Financial Viability Risk Assessment Requirements 2011.
ASQA generally assess RTOs Financial Viability when an organisation applies for initial registration.
ASQA considers common indicators of financial performance and position to determine:
an organisation’s likely business continuity, andits financial capacity to deliver quality outcomes.
These common indicators of financial performance and position are listed in Part 4 of the Financial Viability Risk Assessment Requirements 2011.
Some specific measures used by ASQA to assess financial viability are:
- Net Tangible Assets (total assets, less intangible assets, less total liabilities): are required to be greater or equal to 2 per cent of the forecast revenue (or revenue for the current year if forecast revenue is not available).
- Working Capital Ratio (current assets less current liabilities): are required to be greater or equal to 2.5 per cent of forecast revenue for the next year (or revenue for the current year, if forecast revenue is not available).
- Current Ratio (current assets divided by current liabilities): are required to be greater than or equal to 1.0.
- Debt Ratio (total liabilities divided by total assets): a debt ratio of less or equal to 1.0 is desirable.
- Profitability (net profit after tax): positive outcomes are well regarded; however, losses will not necessarily disqualify applicants, unless net tangible assets are insufficient to support ongoing operations.
ASQA has recently released a Financial Viability Risk Assessment – Fact sheet including information about this process.
