The new Financial Viability Risk Assessment Requirements provide clearer guidance to relevant applicants and RTOs on the common indicators for financial risk assessment, and on the information that may be included in assessment of financial viability.
The Fact sheet—financial viability explains the criteria ASQA uses to assess an organisation's financial viability.
Assessments are generally required when an organisation seeks initial registration with ASQA and at such other times as ASQA deems necessary (for example, following a complaint or prior to ASQA agreeing to renew registration).
ASQA considers common indicators of financial performance and position to determine:
- an organisation’s likely business continuity, and
- its financial capacity to deliver quality outcomes.
Specific measures used by ASQA to assess financial viability:
- 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.
Training Business Consultants recommends you engage a Chartered Accountant (CA) or Certified Practising Accountant (CPA) to review your business plan and financial projections to ensure you meet the financial viability requirements.