The standard for analyzing a farm operation has been the "Sweet 16" ratios which have now been expanded to 21 ratios. These all have their place, but is there a another way to help a farmer understand their business? Financial performance separates the farm into two parts; operations and capital. The operation analysis determines what percent of the gross revenues are converted to profits and what percent of those profits are spent for interest and living expenses. This also determines how much is left on the capital side for debt retirement and growth. Guidelines are given as to what these percentages should be. Understanding how efficient a farmer is in converting revenues to profits starts to provide insight into revenue generation, cost analysis, ability to support family living and debt structure. On our Ag Decision Maker website we have a fact sheet and spreadsheet, C3-59, to help calculate the financial performance.
|Conference||2019 National Farm Business Management Conference|
|Presentation Type||20-Minute Presentation|