Analyzing Farm Financial
Performance
Joe Horner
Dairy/Beef Economist
573-882-9339
The Challenge
Lenders and “some” farmers need to be able
to track and analyze financial trends for farm
businesses.
Few of our clients currently do so, even those
using Quicken and QuickBooks as we have
taught them.
Evaluations from our week long bankers
school reveal lenders consider simple trend
analysis of FFSC ratios most valuable.
Opportunity…add to tool kit
Add simple 1,2,3, financial trend analysis to
some farm borrower files.
Use Purdue’s booklet “Measuring and
Analyzing Farm Financial Performance” cost
$10 or free pdf already on CD.
Or, use the 4-pager, Reader’s Digest Version
and simple spreadsheet on CD and at
http://agebb.missouri.edu/modbu/archives/v3n12/modbu6.htm
Simple 1,2,3, financial
trend analysis…steps
1.Complete a good quality balance sheet
as of December 31st every year.
2.Plug balance sheet totals and selected
lines from Federal Income Tax into
Purdue’s spreadsheet to calc ratios
3.Record ratios by year for trend analysis.
Step 1 – Balance Sheet, Dec
31st every year (hard copy)
Step 1 – Balance Sheet, Dec
31st every year (spreadsheet)
Step 2 –Plug #’s into Purdue’s
spreadsheet to calc ratios
Step 3 –Record ratios by year
for trend analysis
Step 3 –Record ratios by year
for trend analysis
1999
Profitability
Return on Assets
Operating Profit Margin
Liquidity
Current Ratio
Solvency
Debt-to-Asset Ratio
Financial Efficiency
Asset Turnover Ratio
Revenue per Full Time Laborer
Operating Expense Ratio
Depreciation Expense Ratio
Interest Expense Ratio
Net Farm Income Ratio
2000
2001
2002
2003
Summary
You has the ability to track, analyze and
demonstrate financial trends for the
farm business.
This works no matter what accounting
system client uses, (or no accounting
system).
Trends scrub out tax management,
accounting errors and unusual years.