Is Your Farm Operation Over-Capitalized?

Another component of financial risk is over-capitalization.

You have to understand what part of your operation is capitalized and what part is focused on producing revenue assets. This ratio is called the turn-over ratio – for every 1 million dollars of assets – what percentage is turning over into gross-revenue every year. A great target is $400,000 or 40%. This money is what you use to pay off your debt, pay yourself, and feed your family.

Watch Reg Shandro explain how to find out whether your farm operation is over-capitalized.

If you’d like help with your financial analysis, download the Agricultural Business Analyzer.
This workshop was funded in part by the Agriculture & Food Council of Alberta


Is your Farm Operation Over-Capitalized?

 

0 replies

Leave a Comment

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *