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Measuring & Analyzing Farm Financial Performance

Alan Miller

Summary

In 1999, Farm Management Specialists at Purdue University developed a set of four Excel-based worksheets for measuring and analyzing farm financial position and performance. These worksheets were first issued in print form in Purdue Extension publication number EC-712. The worksheets were later incorporated into a distance education program entitled "Strategic Business Planning for Commercial Producers" which is available on the internet at: http://www.agecon.purdue.edu/extension/sbpcp/index.asp The worksheets were also used to teach financial analysis in the "Executive Institute for Commercial Producers" program, an educational partnership of the Purdue Center for Food and Agricultural Business and Farm Credit Services of Mid-America. A subsequent program for Farm Credit borrowers, "Making Financial Decisons in Agriculture," is still on-going. Worksheet 1 is used to compile input information derived from the farm operator´s IRS Form 1040 Schedule F and from beginning and ending balance sheets. Selected measures from the Farm Financial Standards Council´s original "Sweet 16" are summarized in Worksheets 2 and 3, and the "Dupont" profitability linkage model is used in a streamlined form on Worksheet 4 to assess proposed changes in the farm operation. In 2010 the four worksheets were revised to reflect changes in the FFSC recommendations in 2008 and to reflect lessons learned from our extensive use of the worksheets in Extension settings over the previous ten years. This presentation provides an overview of the revised worksheets for measuring and analyzing farm financial performance and highlights lessons learned from using this tool to teach financial analysis.

Details

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