Efficiency Ratios
Financial efficiency refers to the firm's competence in performing
its management functions. Or stated differently, financial efficiency
refers to the efficiency with which various types of farm assets
are managed.
Gross ratio: (Cash operating expenses/Gross cash farm
income)—Measures the proportion of gross cash farm income
absorbed by cash operating expenses.
Interest to gross cash income: (Interest/Gross cash farm
income)—Measures the share of gross cash farm income committed
to interest payments (excludes operator dwelling).
Asset turnover: (Gross cash farm income/Farm business
assets)—Measures the gross farm income generated per dollar
of farm business assets.
Net cash farm income to debt ("debt burden ratio"): (Net
cash farm income/Farm business debt)—Measures the burden
placed on net cash farm income to retire outstanding debt.
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