Financial ratio analysis using ARMS data

Ahrendsen, Bruce L.; Katchova, Ani L.

doi:10.1108/00021461211250492

Cited by 22 publications

(31 citation statements)

References 3 publications

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“…The analysis is based on data from the Agricultural Resource Management Survey (ARMS) The five measures of the financial performance of U.S. farms represented by the respective financial ratios are: liquidity (current ratio), solvency (debt-to-asset ratio), profitability (return on assets as well as operating profit margin ratio), efficiency (operating expense ratio), and repayment capacity (term debt coverage ratio). Table 1 shows the formulas used to calculate these financial ratios, based on recommendations from the Farm Financial Standards Council (Ahrendsen and Katchova, 2012). Each financial ratio is classified as being in the critical zone if it exceeds a critical threshold, indicating that farmers are experiencing financial stress.…”

Section: Models and Datamentioning

confidence: 99%

Evaluating financial stress and performance of beginning farmers during the agricultural downturn

Katchova

Dinterman

2018

AFR

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This study examines farm financial performance and stress for all farmers versus beginning farmers in the U.S. with emphasis on the agricultural downturn experienced since 2013. Using the USDA's Agricultural Resource Management Survey (ARMS) data, probit models are estimated to study the personal and farm characteristics that affect whether or not the financial ratios fall into critical zones as defined by the Farm Financial Standards Council. The financial ratios involve liquidity, solvency, profitability, efficiency, and repayment capacity. Beginning farmers are at a greater risk of financial stress on average, with higher likelihood of financial stress in liquidity and efficiency. Further, the recent agricultural downturn has negatively affected liquidity, solvency, and profitability for farmers while repayment capacity does not appear to be affected. During the downturn, beginning farmers are better positioned than the general farming population with respect to liquidity and repayment capacity. This paper applies current lending practices to a nationally representative sample of farms over a time of changing economic conditions for the agricultural sector.

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Section: Models and Datamentioning

confidence: 99%

Evaluating financial stress and performance of beginning farmers during the agricultural downturn

Katchova

Dinterman

2018

AFR

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“…An article by Ahrendsen and Katchova [20] compared the financial ratios suggested by the American Farm Financial Standards Council [40] with those reported by the Agricultural Resource Management Survey (ARMS) [41]. A corresponding comparison does not exist for the pan-European FADN; whose 'standard results' do cover just a few high level financial ratios, such as farm net income and cash-flow, which apart from income per family work unit are all absolute figures [42].…”

Section: Framework Of Analysis: Financial Indicatorsmentioning

confidence: 99%

“…European assessment approaches prevalently use three indicators to depict the economic sustainability: profitability, liquidity and stability [4,15,16]. Further indicators, less prominently addressed by literature, deal with productivity, autonomy, resilience, solvency, repayment capacity, financial efficiency and local economy [17][18][19][20].…”

Section: Introductionmentioning

confidence: 99%

Financial Ratios as Indicators of Economic Sustainability: A Quantitative Analysis for Swiss Dairy Farms

et al. 2018

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In agriculture, a rising number of sustainability assessments are available that also comprise financial ratios. In a literature review of farm management textbooks, taking account of the differences between European and North American practices and considering prevalent sustainability assessment approaches, we identified frequently used financial ratios. Five ratios relate to the indicator profitability and four to the indicator liquidity. Another eight financial indicators refer to the indicators financial efficiency, stability, solvency and repayment capacity. Based on more than 14,000 accountancies of dairy farms from the Swiss Farm Accountancy Data Network (FADN), we carried out a Spearman correlation analysis for normalised and harmonised financial ratios. The correlation analysis revealed mostly positive correlations. To assess the implementation of a quantitative economic sustainability assessment we compare an aggregated indicator compound of all 17 ratios with two selections of financial ratios–first, a compound European and, second, a compound North American economic sustainability indicator. The correlation between the complete and the reduced sets of indicators suggest that both aggregate economic indicators can be reasonably applied to estimate the economic sustainability for Swiss dairy farms.

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“…Additionally, to the extent that the relative solvency-based financial indicator depends also on the debt-to-asset ratio which has a long right tail, this measure of economic well-being hence cannot be calculated for the relatively few farming operations that own no assets (Ahrendsen and Katchova 2012).…”

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confidence: 99%

Strategies to Manage Risk and their Role in Impacting Economic Performance among Farm Households

El‐Osta¹

2018

AEF

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Data from the 2015 ARMS and a multinomial probit regression model were used in an attempt to discern the impact of socio-economic factors on the likelihood of a farm household falling in a favorable income-wealth category delineated by above-median income and wealth levels. A primary determinant considered was the number of risk management strategies utilized by the farm household. Findings indicate that farmers who layer up the adoption of risk management strategies are most likely to secure an economic performance status characterized by 'low-income, high-wealth'. Aging farm operators and those with college education and who operate larger sized farms are found more likely to be in the top economic performance category of 'high-income, high-wealth'.

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Financial ratio analysis using ARMS data

Cited by 22 publications

References 3 publications

Evaluating financial stress and performance of beginning farmers during the agricultural downturn

Evaluating financial stress and performance of beginning farmers during the agricultural downturn

Financial Ratios as Indicators of Economic Sustainability: A Quantitative Analysis for Swiss Dairy Farms

Strategies to Manage Risk and their Role in Impacting Economic Performance among Farm Households

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