Whole Farm > Financial > Analysis

Updated November, 2019
File C3-56

Farm Financial Statements

The financial position and performance of a farm business can be summarized by four important financial statements. The relationship of these statements is illustrated below. Information from these statements can be used:

  • to make important financing and investment decisions
  • to substantiate credit applications
  • to derive performance measures for analyzing the farm business
  • to develop budgets for planning purposes

The major statements and their purposes are as follows:

Net Worth Statement - Summarizes the property and financial assets owned, the debts owed, and the net worth of the business at a point in time

Net Income Statement - Summarizes the income generated, the expenses incurred, and the net income earned by the business during a period of time.

Statement of Cash Flows - Summarizes all the sources and uses of cash by the business during a period of time.

Statement of Owner Equity - Shows how net worth changed from the beginning to the end of the year.

Forms for preparing each of these statements are found in this publication. Several supplemental schedules also are provided, on whichassets and liabilities can be listed and subtotals of their values carried forward to the statements. Most of the information can be taken from the same sources used to prepare a farm income tax return, plus a listing of assets owned and liabilities owed.

More detailed information can be found in the following ISU Extension and Outreach publications:

relationship of the four major financial statements

 

William Edwards, retired economist. Questions?

Author

William Edwards

retired extension economist
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Use this decision tool to create a five-year trend analysis.
Use this decision tool to calculate a comprehensive set of financial statements including the beginning and ending net worth statements, the income statement, the cash-flow statement, the statement of owner equity, and the financial performance measures. Also available as an example of farm financial statements.