General Farm Management & Strategy

It is widely accepted that accrual accounting provides a more accurate estimate of annual farm profitability than cash accounting or Schedule F net farm profit. This article compares cash and accrual net farm income for a case farm in west central Indiana given alternative scenarios pertaining to prepaid expenses and crop inventories.

There are numerous factors impacting a farm’s debt holding capacity.  It is important to remember that financial leverage or debt directly impacts a farm’s growth rate through its effect on expected returns and risk.

Since its peak in 2013 at $123.7 billion, average U.S. net farm income has averaged $82.7 billion or approximately 33% less than the peak value. This article discusses changes in the U.S. farm sector balance sheet as well as liquidity and solvency ratios.

Income tax liabilities arise from differences between balance sheet values of certain assets and liabilities, and the tax basis of those same assets and liabilities.  Deferred taxes reconcile the tax basis of balance sheet assets and liabilities with the basis currently being used to value assets and liabilities on a balance sheet, which is usually market value.

This article is one of a series of financial management articles that examine financial statements and financial analysis.  In this article, the components of a statement of owner’s equity are illustrated and described.

A sources and uses of funds statement, often referred to as a flow of funds report, provides a mechanism for reporting how a farm’s performance during an accounting period influenced and was influenced by major funding activities.