Non Farm Income: $52,000
Example #1
Jim and Sally grow apples on 10 acres they purchased from a family friend. They have been selling apples for 3 years. They have increased their sales to $20,000; however, they still have not had a profitable year. Both Jim and Sally have off-the-orchard employment. Jim works full time and earns about $40,000 a year. Sally runs their retail store and works seasonally in a nearby town earning about $12,000 each year.
They have been feeling like they are very strapped for cash. They would like to sit down with us to evaluate their financial strengths and weaknesses. Below is a summary of the pertinent information that we will need to help them.
Non Farm Income: $52,000
Value of Farm Production: $20,000
Operating Expenses: $18,000
Interest Expense: $10,000
Depreciation Expense: $3,000
Evaluation Strength Weakness
Liquidity Ratio
Repayment Capacity
105%
Operating Expense Ratio
Depreciation Expense Ratio
Interest Expense Ratio
Equity to Asset Ratio
Asset Turnover Ratio
Solutions:
Example #2
Bill and Jill and their family run a large orchard. They have about 100 acres of apple trees which they sell about half at their two retail stores and the other half wholesale. They both work on the orchard on a full time basis along with several seasonal employees. They are considering expanding their orchard by adding another retail store in a neighboring town. They would like to evaluate their current financial position to see if they can withstand a couple of poor years at the new location.
Value of Farm Production: $275,000
Operating Expenses: $193,000
Interest Expense: $20,000
Depreciation Expense: $23,000
Evaluation Strength Weakness
Liquidity Ratio
Repayment Capacity
161%
Operating Expense Ratio
Depreciation Expense Ratio
Interest Expense Ratio
Equity to Asset Ratio
Asset Turnover Ratio
Conclusions: