How To Calcuate Ratio Of Fixed Assets To Long-Term Liabilites Five (5) Powerful Tools You Can Use to ACCURATELY Measure How Well Your (Farm) Business is Doing

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Five (5) Powerful Tools You Can Use to ACCURATELY Measure How Well Your (Farm) Business is Doing

As a Performance Enhancement Specialist and Best Practice advocate, providing Cost-Saving Ideas/Services to Farm Business Owners, the above subject is one that I consider most important for ANY business owner who truly wants to ensure his/her business runs profitably on a long term basis.

Over the years, in the course of studying many farm businesses out here, I have come to identify certain “Major Factors” that determine the success or otherwise of a farm (or indeed any other) business enterprise. You can be sure the list of factors outlined below is NOT exhaustive. I however believe it covers some of them most critical considerations.

To Succeed, You Must Adopt A BOPMS(TM)

This is a concept I developed: BOPMS(TM) means Best Operating Process Management System which involves doing the following:

1. (You and/or Your Operatives) Developing practical/hands-on proficiency in the technical and operational aspects of the business.

2. (You and/or Your Operatives) Acquiring sound knowledge of ANY and ALL theoretical concepts, principles and/or philosophies required for successful management of the enterprise.

3. Exploring realistic and practical ways to incorporate software automation into the routine (farm) business data recording, analysis/reports generation – and accounts preparations.

Read my article: Every (Farm) Business, No Matter How Small, Needs PC-Based Record Keeping & Accounts Automation

4. Entrenching a Best Practice/Continuous Improvement culture in the execution of daily farm process management tasks by operatives. Very crucial in this regard will be your unflinching commitment to exploring cost-effective ways to achieve increased farm output at reduced costs – via Variable Costs Reduction Initiatives.

Read my other articles whose titles appear below to learn more:

a. You Can Increase Your Profits Without Raising Your Prices

b. Catfish Farmers Beware Of Uncontrolled Variable Costs

5. Making ACTIVE monitoring of the (Farm) business’ Key Performance Indicators(Farm KPIs) a deeply ingrained habit that YOU and your supervisory/management level operatives CONTINUALLY cultivate.

If you do 1 to 5 consistently, your (farm) business will not only be better managed as a result, its ability to deliver profitable returns to you for the long term will be significantly enhanced.

It goes without saying that item 5 above is where ALL the work done in 1 to 4 will be judged. And that is why I encourage (farm) business owners to learn how to competently compute five(5) powerful (Farm) Key Performance Indication Tools – specifically Two(2) Financial Statements and Three(3) Performance Measures viz:

A). Two(2) Financial Statements:– The “Income & Expense Statement” (or P & L report) and the “Networth Statement” (or Balance Sheet)

B). Three(3) Performance Measures:– “Net Capital Ratio” (NCR), “Working Capital Ratio”(WCR) and “Current Capital Ratio” (CCR).

Note that the financial statements are useful for getting an overall picture of the financial performance of the (farm) business specifically in terms of income earned and expenses incurred leading to the final bottom line margin, which would be preferably positive – but CAN be negative.

The Performance Measures however go deeper. They help you uncover areas of possibly “poor health” in your (farm) business (or indeed in ANOTHER person’s [farm] business that you wish to purchase or invest in!) which your financial statements would not directly reveal.

For instance, the measures indicate the degree of a (farm) business’ “financial safety” by comparing the load of assets and liabilities carried by it at a point in time. As a business owner, THAT information alerts you to areas in the business that you may need to take decisive action to fortify in order to avert potential disaster etc.

But as I earlier hinted, this kind of information can be EVEN more useful to you if/when you want to purchase – or invest in – a business owned by another person.

As a prospective buyer or investor, it helps you assess how “safe” or “risky’ it would be to enter into the business. Also, knowing these ratios puts you in a strong position to negotiate MORE successfully with a person from whom you want to purchase a business.(That is of course, if the ratios do not suggest doing so would end up losing YOU money!)

Finally, it goes without saying, that what I have offered in this article cannot be considered professional advice. It is simply potentially useful information brought to your attention, and which I encourage you to explore using beneficially, by consulting a competent professional(s) or expert(s).

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