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Best Practices Suite
Business Development for Farm Businesses — Farm Financial Assessment


Deliverables - Farm Financial Assessment (FFA):

The written FFA reports will include the following:

  • Business Overview
    • Name, Address
    • Business Profile
    • Key Objectives the FFA will address

     

  • Financial summary of profitability/viability of the farm operation report (in plain language) including:
    • Net worth
    • Net income
    • Interpretation and discussion of the results

  • Farm Business Ratio Analysis: Six (6) Required Ratios within the following categories:
Category What Does it Measure? Ratios

Financial Efficiency

How effective the business is using its assets to generate income

Asset Turnover

Liquidity

Assesses the business's ability to pay their bills as they come due

Current ratio

Profitability

Measures how well the business is able to generate a profit

Operating Profit Margin ratio Return on Assets

Solvency

Determines how much the business is relying on debt to finance the business

Debt to Equity ratio

Repayment Capacity

Measures the ability of a borrower to repay term farm debt from farm and non-farm income

Debt Servicing Capacity Ratio
    • Additional ratios are optional and can be used at the discretion of the farm business advisor and farm business

       

  • Financial Plan (choose one of the following, as a minimum)
    • Detailed cost of production enterprise analysis for main enterprises

or

    • Financial projections for a minimum of one year (monthly or quarterly) to meet identified goals in the farm operation's Action Plan

  • Appendix: Farm Financial Statements
    • Statement of all Assets and Liabilities (current year)
    • Profit and Loss Statement (current year and past two years)

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