Getting the lowdown on your farm’s financial health

Simple Farm Ratio Analyzer is a quick way to determine whether your farm is on the right financial track, says farm finance specialist

Bags Of Money On A Farm Field
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An Excel program available from Alberta Agriculture and Rural Development can help producers assess the financial state of their farm business.

The Agricultural Business Analyzer (ABA) Simple Farm Ratio Analyzer gives users a quick idea of the financial health of their farm or ranch as well as a comparison of their business’s ratios to industry benchmarks, said farm finance specialist Rick Dehod.

“The ABA Simple Farm Ratio Analyzer is a shortcut Excel program that takes just eight key financial entries and calculates financial ratios for the farm/ranch and colour codes them in comparison to industry benchmarks,” said Dehod.

“These eight key financial numbers can be taken from your accountant-prepared financial statements for the past year and entered into the various open cells in the one-page spreadsheet.”

The eight key numbers are: farm gross revenue, farm gross expenses, depreciation, debt servicing payments, current assets, long-term assets, current debt and long-term debt.

“With these eight quick entries you will know how your farm is doing financially,” said Dehod. “You can then consult with your accountant or an agricultural finance specialist to come up with plans to mitigate and improve those areas where your financial ratios are weak.”

Using your net worth statement for the beginning of 2015, you can do your income and expense projection, sources and uses of funds (cash flow) for the year, and project your closing net worth statement for 2015, said Dehod.

“Once you have your projected 2015 closing net worth statement, you can generate the year-end financial ratios, and compare them to the ratios you generated from your beginning net worth statement,” he said. “This will give an indication if your 2015 operating plan will progress the financial viability and health of your farming operation.

“It all seems like a lot of work, but it will help you create an awareness that can help you make better decisions to increase the viability and success of your farm business.”

To find the analyzer, go to the Alberta Agriculture and Rural Development website. Rick Dehod can be reached at 780-427-4466.

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