While this ranch's inventory adjustment was positive, your inventory adjustment could be positive or negative. Remember that gross cash income and gross accrual adjusted income are different. Overhead costs under the economic profitability analysis are made up of depreciation and interest. Principal payments are not included in a profitability analysis. All principal payments do is determine who owns the assets.
Principal payment have nothing to do with the earned returns to the assets.
If land is cash rented, cash rent could also be included in the overhead costs. In this case, the producer did not rent any of the land. Depreciation on this farm is costing 17 cents per dollar of accrual adjusted gross income generated. If depreciation and interest are added to the direct cash expenses, it cost this rancher 81 cents to produce each dollar of accrual adjusted gross income generated. This is all a farm or ranch family contributes.