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Analyzing Farm Financial Performance

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.

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Analyzing Farm Financial Performance

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  1. Analyzing Farm Financial Performance Joe Horner Dairy/Beef Economist 573-882-9339

  2. 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.

  3. 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

  4. 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.

  5. Step 1 – Balance Sheet, Dec 31st every year (hard copy)

  6. Step 1 – Balance Sheet, Dec 31st every year (spreadsheet)

  7. Step 2 –Plug #’s into Purdue’s spreadsheet to calc ratios

  8. Step 3 –Record ratios by year for trend analysis

  9. Step 3 –Record ratios by year for trend analysis

  10. 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.

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