At the August 3rd Mid-South Ag Finance Conference, Dr. David Kohl provided producers with financial & management benchmarking data. As I work with producers in farm financial management, two questions that always come up – How do my numbers compare to others? and Am I where I need to be? Comparing your financial information to benchmarking data can help give producers a sense of how their operation is performing. Look over the dashboard below on some of the key financial & management ratios and see how your operation stacks up. If we can assist you in analyzing your operation, contact your local UT County Extension office or Area Specialist – Farm Management .
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Financial & Management Benchmarking Dashboard (Top of Cycle) |
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| Benchmark Measure |
Green |
Yellow |
Red |
| Percent Equity |
>75% |
50-75% |
<50% |
| Working Capital/Revenue |
>50% |
25-49% |
<25% |
| Return on Assets |
>15% |
7-14% |
<7% |
| Coverage Ratio |
>300% |
125-300% |
<125% |
| Operating Expense/Revenue (excluding interest & depreciation |
<65% |
65-75% |
>75% |
| Know Cost of Production |
By Enterprise |
Farm, Ranch, Overall |
None |
| Credit Score |
>700 |
650-700 |
<650 |
Source – Dr. David Kohl, 2011 Mid-South Ag Finance Conference.
Coverage ratio =( Net farm income from operations + total nonfarm income + depreciation expense + interest on term debt and capital leases – total income tax expense – family living withdrawals)/principal and interest payments on term debt & capital leases. If depreciation has been accelerated through taking the section 179 deductions, then take a 3-5 year average of depreciation.
Green = Go, good shape
Yellow = Caution, need to watch carefully, may need to make changes
Red = Warning, need to re- evaluate operation, make changes as necessary
