Financial Stability of Public Universities in Kenya: Disaggregating The Contribution of Liquidity, Operational Performance and Asset Efficiency

Purpose: This study disaggregated the CFI and examined the underlying dimensions of financial condition in Kenyan public universities. Methodology: The study used a longitudinal quantitative design, analyzing audited financial statements from 22 public universities for the 2018–2024 fiscal years, yielding 154 university-year observations. Financial condition was assessed using the CFI and its four component ratios: Primary Reserve Ratio (PRR), Net Operating Revenue Ratio (NORR), Return on Net Assets (RONA), and Viability Ratio (VR). Descriptive and longitudinal analyses examined trends in the aggregate CFI and its constituent components. Findings: The findings show that the aggregate CFI can obscure important differences across the underlying dimensions of financial condition. Although the sector's overall CFI indicates relative financial soundness, component-level analysis reveals persistent weaknesses in operating performance and asset productivity, as well as varying levels of liquidity resilience. The Viability Ratio offers limited differentiation because most universities reported no long-term debt. Unique Contribution to Theory, Policy and Practice: The study contributes theoretically by demonstrating the limitations of relying exclusively on a composite financial health measure and the value of component-level analysis in revealing financial vulnerabilities that aggregation may obscure. In practice, the findings provide university managers with a more diagnostic basis for identifying specific areas requiring financial intervention. From a policy perspective, the study supports using disaggregated financial indicators alongside the CFI to monitor the financial resilience and sustainability of public universities in Kenya.