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Farm Health Check - Key Indicators

At a recent Agriculture Update for Professionals attended by Kelvin and Carla, some interesting formulas were presented to use as financial measurement guidelines. How do they work for your operation?

  • Operating Loan + Accounts Payable should be < 50% of unsold inventory +Accounts Receivable
  • Operating expenses should be < 65% gross revenue (averaged over past 4 years)
  • Net Income (excluding government programs & interest costs) should be > 20% of gross income (excluding government programs)
  • Net Income should be > 2x the cash rent that could be received from the land
  • Machinery Investment should be < 1.5 x gross revenue per acre or machinery leases < 15% of gross revenue
  • Debt should be paid in less than 5 years if all net farm income were directed towards payments