Developing Financial Efficiency Index for Higher Education Institutions

The decision-making process, as well as general management of the higher education institution, is nowadays becoming more and more complex and complicated; therefore, management of the higher education institution requires modern tools and methods to ensure sustainable development of the organization and to meet different shareholders’ interests and necessities. The objective of the current paper is to cover the existing gap and to provide the management of the higher education institution in Latvia with an acceptable financial efficiency measurement tool—financial health index—useful in the process of setting the institution’s strategic goals, developing and implementing strategies, as well as performance measurement. The authors are using the methodology of ratio analysis in higher education in Latvia. To solve the weight determination problem, the authors apply findings described. The major advantage of the “new” index is its clear weightings based on the simulation and not one’s opinion. So that the kind of approach would lead to the usage of the reliable tool, allowing comparison between different organizations and determination of best practice approach.