Financial Measures and Ratios: Financial Efficiency

This is one in a series to introduce you to financial measures and ratios. This video provides information on measuring your farm’s financial efficiency. Financial efficiency is an indication of a farm business' success in using productive resources (land, labor, capital) and managing those resources (purchasing, pricing, financing and marketing). Said another way, financial efficiency is the intensity with which a farm business uses assets to generate revenue.

Through the preparation of your management reports (financial statements), you have completed the historical review and understanding of your farm business’s financial position and performance. Financial measures, as absolute measures or financial ratios, can be most informative when analyzed to the same measures in the previous time periods or benchmarked to comparable farm businesses.
Using information generated from the management reports (financial statements), you can benchmark your business against other farms in the industry, determine strengths and weaknesses, measure financial progress, set financial goals,and future management and decision-making.

This material was developed by University of Wisconsin - Madison Division of Extension educators and specialists. The material is supported through funding from USDA/NIFA.

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