Income Statement

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Income Statement
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Divide Yourselves According to What Your Are On
An Income Statement.

• 2000.00 from sale of 4 calves
• 1000.00 Hay Bill
• 50.00 Vaccination Bill
• 600.00 from sale of cull cow
• 100.00 for rent on facilities.
• 5,000.00 crop sales
• 600.00 seed bill
• 1,000.00 fuel bill
• 1,666.00 rent for crop ground
• 2,000.00 for crop government payment

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What is an income statement?

• An income statement is a list of incomes and
  expenses in a business that determine the
  profitability of a business. It allows an
  operator to evaluate or analyze the profitability
  of a business by utilizing equations and ratios.

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What is an income?

• Income is money received from the sales of
  services or products that a business
  provides. This may include items such as sales
  of crops, livestock, or even government payments.

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What is an expense?

• An expense is money paid out to operate a
  business. This may include items such as fuel,
  hired labor, feed, seed, etc.

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What is an adjustment?

• Some adjustments have to be made in order to give
  a clearer picture of the profitability of a
  business. These adjustments are made to incomes,
  expenses, and inventories. These adjustments are
  made by taking ending values on a balance sheet
  and subtracting beginning values. This converts
  a cash income statement to an accrual income
  statement.

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Operating Expense Ratio

• Determines what percent of total income is spent
  on operating expenses.
• Total expenses depreciation and
  interest/Total Income

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Depreciation Expense Ratio

• Determines what percent of total income is spent
  on depreciation expenses.
• Depreciation/Total Income

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Interest Expense Ratio

• Determines what percent of total income is spent
  on interest expenses.
• Cash Interest Paid Change in Interest
  Payable/Total Income

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Net Farm Income From Operations Ratio

• Determines what percent of total income is net
  farm income from operations.
• Net Farm Income From Operations/Total Income

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Return to Equity Capital and Management Ratio

• The portion of net farm income returned to equity
  capital and management after subtracting out
  operator and family allowance.
• Net Farm Income Operator and family allowance

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Rate of Return on Farm Assets

• Shows the percentage return on investment of the
  business.
• Must use several equations to get the Rate of
  Return on Farm Assets.
• Net Farm Income Total Interest Expense Return
  to Unpaid Operator and Family Labor, Total
  Capital, and Management
• Return to Unpaid Operator and Family Labor, Total
  Capital, and Management Operator and Family
  Labor Allowance Return to Farm Assets.
• Return to Farm Assets/Average Total Farm Assets x
  100 Rate of Return on Farm Assets

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Rate of Return On Farm Equity

• Shows the percentage return on net worth.
• Return to Equity Capital and Management (Shown
  in V.)/Average Farm Net Worth

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Rate of Return on Borrowed Capital

• The value calculated from this should be compared
  with the average interest rate for borrowed
  capital from a lending institution to evaluate
  whether returns are great enough to pay the cost
  of borrowing those funds.
• Return on Farm Assets (VI, B, 2) Return to
  Equity Capital and Management (V)/Average Total
  Farm Assets Average Net Worth. (Found by adding
  beginning and ending values from balance sheet
  together and dividing by 2)

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Operating Profit Margin Ratio

• Defines profit as a percentage of total revenue.
• Net Farm Income Total Interest Expense
  Withdrawals for Operator and Family Labor/Total
  Income