Farm and ranch businesses have a sizeable investment in equipment, buildings, land, and livestock. These investments require their owners and managers to remain knowledgeable about the financial condition of their business. The information to calculate measures of financial performance can be found in their farm record books or accounting system.
The Farm Financial Standards Council (www.ffsc.org) provides guidelines to help farmers and ranchers evaluate their profitability, debt capacity, and financial risk of their business. The measures offered in this publication are based on those guidelines. Benchmarks used are from the South Dakota Center for Farm and Ranch Management at Mitchell Technical Institute. The areas of financial guidelines commonly measured are liquidity, solvency, repayment capacity, profitability, and financial efficiency.