Six new publications on analyzing farm finances
Looking for guidance on how to make sound financial and marketing decisions for your farm? Check out these six new or freshly updated publications from FFED program manager and agricultural economist Craig Chase. Download them all as free PDFs below from the ISU Extension Store.
Farmers or other business owners should analyze five key measures of financial performance: liquidity, solvency, profitability, financial efficiency, and repayment capacity. Together, these criteria measure both financial condition and performance, allowing the owner, as well as a lender or other outside reader, to better understand how well the business is currently doing. The ultimate goal of using any record-keeping system is to help make better management decisions. Farm records should allow the owners to compare their operation to others, or to its own history as well as allowing the owners to plan and evaluate proposed projects. 6 pp.
Cash Flow Versus Profitability (FFED 35)
Positive cash flow and profitability (net farm income) are two common business financial goals. One without the other is not only possible but common, and the business may remain active for a while. However, a farm (or any other business) needs both positive cash flow and profitability over the long run to be sustainable. 6 pp.
Pricing for Profit (FFED 36)
Pricing products that do not have an established market can be difficult. A farmer can price produce one of three ways: customer/market-based, competition-based, or cost-based. 5 pp.
Using Partial Budgets to Make Decisions (FFED 37)
Partial budgets analyze projected costs and revenues associated with some change to the business determining if implementing the proposed change creates economic gain. It is critical to utilize the financial numbers from the farm in the base consideration and accurate estimates for the proposed change. 3 pp.
Improving Profitability (FFED 38)
This publication focuses on increasing profit margin. The examples in this publication are fruits and vegetables. The same process of determining what expenditures go into which bucket, the development of an enterprise budget, and the determination of changes in price, production practices, or product mix to improve profitability stay the same regardless of the enterprise. A farmer can make many business decisions to improve profitability once he/she determines profit margins. 3 pp.
Evaluating Marketing Outlets (FFED 39)
This publication outlines three methods a farmer can use to determine costs associated with selling farm products: using individual product budgets, using whole-farm records, and using partial budgets. 5 pp.
Improving Your Farm Profitability series, by Craig Chase
- Need a business loan? Think like a lender.
- Cash flow vs. profitability.
- The four buckets.
- Paying yourself: be sure to value your labor in farm budgets.
- How to analyze financial condition and performance for your farm.
- Calculating your farm’s appropriate debt level.