For example, a comparison of the gross margins of different h-Wt crops may be relevant but comparing sheep and wheat growing activities may be erroneous, because of complementarily. The sheep enterprise may enhance the wheat enterprise by providing weed control when a paddock is in pasture. The wheat enterprise may complement the sheep enterprise by providing stubble for summer grazing. For this reason it is often more useful to examine the profitability of different whole farm mixes of enterprises. If you still want to compare enterprises, it is necessary to separate the costs arising from each of them.
Some costs are easy to separate, such as drench for livestock or insecticides for crops.
Others are more difficult, such as fertilizer used for both pastures and crops, and labor that is used for all enterprises. Alternatively, you can estimate the proportion relating to each activity. Calculation of farm profit Your bank balance at the end of the year is an indicator of your farm's performance. However, your bank balance may not provide the best indication of farm profit because it does not include any changes in the value of assets and liabilities. To assess the financial state of your farm business, you must compile a list of assets and liabilities and determine how these change over the compared periods.