October 13, 2020
Financial Management – Statements & Analysis
by Michael Langemeier, Michael Boehlje, and Elizabeth Yeager
Financial management involves the evaluation of liquidity and solvency, financial planning, acquisition and use of financial resources, asset purchases and farm growth, and relationships with agricultural lenders. This series starts by taking a deep dive into the key components of financial statements such as a market value balance sheet, an income statement, a sources and uses of funds statement, and a statement of owner’s equity. Key ingredients to this section include computing the sources of changes in farm equity, and the measurement of profitability and the efficiency of farm asset utilization. With this background, a producer is ready to examine benchmarks of financial performance, repayment capacity, crop machinery investments and costs, and labor efficiency and productivity, and to stress test their financial position and performance.
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Margaret Lippsmeyer, Michael Langemeier, James Mintert, and Nathan Thompson segment U.S. farms by farm resilience, management practices, and producer sentiment. This paper was presented at the Southern Agricultural Economics Meeting in Atlanta, Georgia in February.
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