Understanding your key financial ratios helps manage your farm business sustainability.
As farm businesses become more sophisticated and owners strive ever harder to improve profitability and create wealth, the move beyond simple measures of physical production to whole business analysis is gaining momentum. The use of financial ratio and benchmark analysis has become increasingly popular with progressive farm business operators in recent years.
- Top farm businesses should be able
to quote and understand their key
financial ratios and their trends
- Calculating financial ratios is quite
simple - with a little explanation.
- Five key areas to focus on:
Liquidity, Solvency, Profitability,
Cost Efficiency and Debt
- Ratio trends over several years are
a more valuable tool than looking at
one year in isolation.
- Monitoring your business’ financial
ratios does not guarantee greater
profit, but it will improve the
likelihood of success over time
and improve the understanding of
- Context is very important –
compare apples with apples!
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GRDC Project Code
National, North, South, West, Overseas