Risk Tolerance II
FINANCIAL GUILDELINES FOR
AG PRODUCERS
“Sweet 16” Recommendations
Where appropriate, the following financial measures are recommended for use by agricultural
producers, agribusiness, and financial institutions. These financial measures adequately measure
financial position and financial performance. Explanations of individual measures are presented to aid
in understanding the use and limitations of the measures. All financial measures need to be calculated
for every situation – the situation may not call for all financial measures, and the accounting
information may not be available to calculate all financial measures. Finally, this list of financial
measures is not exhaustive; and the user may calculate additional measures, if the accounting
information is adequate and such other measures provide more insight.
Liquidity
1. Current Ratio
2. Working Capital
Solvency
3. Deb/Asset Ratio
4. Equity/Asset Ratio
5. Debt/Equity Ratio
Profitability
6. Rate of Return on Farm Assets
7. Rate of Return on Farm Equity
8. Operating Profit Margin Ratio
9. New Farm Income
Repayment Capacity
10. Term Debt and Capital Lease Coverage Ratio
11. Capital Replacement and Term Debt Repayment Margin
Financial Efficiency
12. Asset Turnover Ratio
13. Operational Ratios
a. Operating Expense Ratio
b. Depreciation/Amortization Expense Ratio
c. Interest Expense Ratio
d. Net Farm Income From Operations Ratio
For more information on the “Sweet 16” contact the Farm Financial Standards Council (FSC) at 1212 S Naper Boulevard, Suite 119,
Naperville, IL 60540. TEL: 630-637-0199, FAX 630-637-0198. Or visit their website: http://www.ffsc.org.
Grains Marketing
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