Financial Measures That Strike A CORD

It may be hard to imagine but there are some people that do not find financial analysis particularly appealing! Part of the problem may be that there are so many different financial measures to choose from that it is hard to know which ones to use. If you are looking for some quick 'hits' there are some key ratios, the 'A CORD', that can reveal a lot about your operation.

First let's separate financial measures into four main categories: financial efficiency, liquidity, profitability and solvency. Financial efficiency refers to how successful the business is at using its assets to generate income. Liquidity
assesses your ability to pay your bills as they come due.

Profitability is well known and measures how well the business is able to generate a profit. And finally, solvency
determines how much you are relying on debt to finance the business.

By category, here are my top five ratio picks and how they are calculated:

Efficiency:
Asset Turnover = Gross Farm Sales divided by Total Assets

Liquidity:
Current Ratio = Current Assets divided by Current

Liabilities
Profitability:
Operating Profit Margin Ratio =
(Net Farm Income + Interest Expense) divided by Gross

Farm Sales
Return on Assets = (Net Farm Income + Interest Expense)
divided by Total Assets

Solvency:
Debt to Equity Ratio = Total liabilities divided by Equity.