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Tools to help prepare growers for loan applications and beyond Stan Moore, MSU Extension Educator.

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Presentation on theme: "Tools to help prepare growers for loan applications and beyond Stan Moore, MSU Extension Educator."— Presentation transcript:

1 Tools to help prepare growers for loan applications and beyond Stan Moore, MSU Extension Educator

2 Three Tools Balance Sheet Income Statement Cash Flow Projection Why work with MSU: Now Later

3 Balance Sheet A snapshot of the financial position of the farm business at a give point in time (aka Net Worth Statement). Everything that you own and owe.

4 Accurate and Detailed Balance Sheets Analyze the financial performance of the business. Secure credit and financing from lenders Monitor financial progress over time Make financial projections Understand the financial risk position Provide information for Estate Planning

5 Balance Sheet Decisions Time Frame Scope Market Value of Intermediate and Long-term Assets Cost value=purchase price-depreciation

6 Important Components of a Balance Sheet Assets: Everything owned or coming to the business as of the date of the statement. Current Farm Assets: Cash and other assets that are expected to be realized in cash or consumed in production during a business year. Supplies Growing Crops Income due on previous year’s crops sold Government payments on past activities (crop loans)

7 Important Components of a Balance Sheet Intermediate Farm Assets: Assets that support production. Machinery, Breeding Livestock, Securities not readily marketable. Long Term Farm Assets: Farmland Buildings and Improvements Non Farm Assets:

8 Liabilities Obligations that are owed, related to assets on the balance sheet. Classification does not change as a liability matures. Accrued, unpaid interest should be listed separately and is added to current liabilities. Current Liabilities: those due and payable on demand or within the operating year (including CCC loans).

9 Liabilities Intermediate Farm Liabilities: debts against intermediate assets. Typically start with a note of 2-10 years. Machinery, Breeding Livestock, Trees. Long Term Liabilities: debts against long term assets. Land, Buildings, Trees. Non-Farm Liabilities:

10 Balance Sheet Example:









19 MSU Excel Balance Sheet Simple schedule based balance sheet Does the calculations for you

20 Excel Screen Shot



23 Income Statement Net Cash Farm Income Net Operating Profit Net Farm Income

24 Net farm income is summary of income, related expenses and the resulting profit or loss for a given time period (usually 1 year) Net farm income = net cash farm income with adjustments for inventory, depreciation, and other capital changes.

25 Income Statement




29 Other Income Statement Options: Finpack Software program from Minnesota Many others (farmdoc – University of Illinois) has a cash to accrual income statement spreadsheet.

30 Performance Measures to Know! From the Balance Sheet Debt to Asset ratio – Ability to borrow at all Current ratio – Capacity to pay current debt if needed From the Financial Statement Operating Profit Margin – has the farm showed the ability to make progress in the past 3-5 years Return on Assets Return on Equity

31 Financial ratios – General Guidelines

32 Finpack

33 Projecting Future Performance Two Options Spreadsheets that you can use on your own Finpack software to do FinFlo (Cash Flow projections)

34 Penn State Cash Flow Model







41 MSU Cash Flow Model


43 So why should you consider working with the MSU FIRM team Now Prepare for loan application Later Farm Business Analysis Farm Business Planning What’s in it for MSU Extension? Farm Financial Analysis database


45 For more information Stan Moore – Phone: 231-533-8818 Curtis Talley - Phone: 231-873-2129 Adam Kantrovich Ph.D. Phone: 616-994-4580

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