How Can I Improve Labor Productivity?
Increasing labor productivity enables an industry or economy to produce the same amount or more output with fewer workers. Because labor productivity is directly related to output, it has a…
What Should My Farm Benchmark?
Benchmarking involves comparisons of a farm’s processes and performance measures with past performance, and with best practices and performance measures of other farms. Benchmarking is an important component to a…
Exploring Changes in the Current Ratio from 2006 to 2017
Recent farmdoc daily articles have examined trends in liquidity measures for farms in Illinois and Kansas. In general, liquidity improved from 2007 to 2012, and then declined. This article used…
Operating Profit Margin Benchmarks
This article examines trends in the operating profit margin for a sample of farms over a ten-year period and develops financial performance benchmarks. Specifically, using KFMA whole-farm data for farms…
Agricultural Debt Continues to Increase
Agricultural debt on a nominal basis in Illinois has been increasing since 1991. Data from the U.S. Department of Agriculture (USDA) and Illinois Farm Business Farm Management (FBFM) are shown…
Examining Trends in Liquidity for a Sample of Kansas Farms
Liquidity measures help gauge whether a farm or group of farms has the ability to meet short-term debt obligations. In addition to examining average liquidity values over time, most analysts…
Cash Is King – Revisited
In good times cash is king and in not so good times it is even better. There are three primary liquidity ratios that are important from a business perspective. And…
Weekly Farm Economics
Trends in Farm Balance Sheets over Time
Trends in the financial position of Illinois farms are presented in this article. Overall, farms gained financial strength from 2006 to 2012. Since 2012, working capital has declined. The net…
IFES 2017: Habits of Financially Resilient Farms – Continued
A study funded by the Illinois Soybean Association titled "Identifying Management Strategies of Highly-Profitable Soybean Farmers" utilized data from the Illinois Farm Business Farm Management (FBFM) Association to identify farms…
IFES 2017: Habits of Financially Resilient Farms
Over the past 10 years, returns on Illinois grain farms have changed dramatically. High commodity prices led to rising income and return levels from 2009 to 2012. Beginning in 2013,…
IFES 2017: Where To From Here
While yields for most have assisted in mitigating working capital losses, commodity prices continue to present challenges in creating positive cash flows and profits. Corn at less than $4 continues…
Evaluating Your Capital Debt Repayment Capacity
Many financial measures and ratios assist in evaluating the financial health of a business. Not one of those measures itself can assess the overall financial condition of a farm business.…
U.S. Farm Sector Financial Performance
Metrics that can be used to measure farm profitability include earnings before interest, taxes, and amortization (EBITA), net farm income, the operating profit margin ratio, return on assets, and return…
U.S. Farm Sector Capital Expenditures
U.S. farm sector capital expenditures continue to adjust to declines in net farm income and net cash income since 2013. Real net farm income has declined approximately 51 percent since…
U.S. Farm Sector Balance Sheet
U.S. net farm income has declined approximately 49% since its peak in 2013. The balance sheet for the U.S. farm sector continues to adjust to the declines in U.S. net…
The Deferred Tax Monster
Because agriculture producers can use cash accounting for federal and state income tax purposes, there is a recognizable difference between taxable farm income and accrual farm income. These differences can…
Transferring Business Management
Transferring business management between generations is one of the most critical steps in transitioning the business from an older generation to a younger generation. Having said that, in numerous instances,…
How Should Farm Business Income be Divided?
If everyone in the farm business owned a similar amount of business assets, worked the same number of hours, and provided management expertise, the answer to the question in the…
Agricultural Debt Continues to Increase
Agricultural debt on a nominal basis in Illinois has been increasing since 1991. Data from the U.S. Department of Agriculture (USDA) and Illinois Farm Business Farm Management (FBFM) are shown…
Trends in Working Capital and Financial Solvency
Many of you are in the midst of preparing financial statements for 2016. It is important to take the time to prepare a complete and accurate set of financial documents…
Understanding Coverage Ratio, a Measure of the Ability to Repay Loans
Completing financial statements and having a good understanding of where their business stands will be very important as farmers meet with their lender when initiating and renewing loans for 2017.…
Should Sweat Equity be Used to Compensate a Returning Family Member?
The term "sweat equity" is used frequently in discussions of the contributions of an off-farm heir to the value of the family owned business. Sweat equity arises in part when…
IFES 2016: Farm Financial Management in Challenging Times
As long as corn prices are projected to be below $4.00 per bushel, net incomes on Illinois grain farms will be relatively low. It is highly likely that below $4.00…
Accelerated Depreciation and Machinery Purchases
It is a common tax management strategy to use accelerated depreciation, which includes bonus depreciation and section 179 depreciation, to reduce taxable income on crop farms. For 2016, up to…
Where Is Your Net Worth?
Net Worth is measured as all assets less all liabilities. If you consider that your liabilities are claims on your assets by your lenders, then you can consider the liabilities…