![]() Value of Production = Gross Cash Income + or – Inventory Change of Crops, Market Livestock, Breeding Livestock, & Other income items – Feeder Livestock Purchased – Purchased FeedĪverage Assets = (Beginning Total Asset Values + Ending Total Asset Values) / 2 The following equations will determine your Asset Turnover Rate:Īsset Turnover Rate = Value of Production / Average Assets An Asset Turnover Rate of 45% - 50% or higher means the farm or business is on strong footing with a rate less than 30% - 35% means the business or farm needs to look at methods to decrease their expenses and increase its production and may be more susceptible to market fluctuation. The ability to have high yields or production with lower input costs and or overall expenses can generate a higher Asset Turnover Rate. The Asset Turnover Rate essentially measures the efficiency of how a business’ or farms’ capital is being used. The Asset Turnover Rate is measured as a percentage, the higher the percentage the stronger the business or farm. Looking at the Financial Efficiency of a business or farm assists the owner(s) in determining how the various aspects of the business such as production, financing, marketing, etc.… effects the gross income of the business. The term Financial Efficiency refers to how effectively a business or farm is able to generate income. This series of articles will look at 21 commonly used ratios and indicators.Īsset Turnover Rate is a measurement of Financial Efficiency and is determined based on information derived from a business’ or farm operations financial statements. Multiple ratios and indicators must be used along with other information to determine the total and overall health of a farming operation and business. You cannot look at a single ratio and determine the overall health of a business or farming operation. There are a minimum of 21 different ratios and indicators that can be looked at by many financial institutions. Financial Ratios & indicators can assist in determining the health of a business.
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