No one measure can indicate farm financial performance or position. Instead, several measures must be calculated to give a more complete picture. Contact your local OSU Extension Center to request educational programs on financial management. Solvency is the ability of the business to pay all debts if it were sold today. The current ratio indicates the extent to which current farm assets, if sold, would pay liabilities due this year.
Profitability measures the financial performance of the farm over a period of time, usually a year.
Net farm income represents the return to land, labor, and management. The rate of return on assets is an index of profitability. If the ROA is greater than the average interest rate on borrowed capital, business equity is expected to increase over time. ROE can be compared to the return on alternative investments. Repayment capacity focuses on the farm's ability to repay debt from farm and non-farm income.