Financial Ratio Benchmarks for Kansas Farms 1995 to 2004
Mark Winger, Colby, Kan., defended his thesis, “Financial Ratio Benchmarks for Kansas Farms 1995 to 2004,” Friday, April 21, 2006. Winger is Vice President of Marketing at Farm Credit Services of Western Kansas in Colby. He graduated from Kansas State University in May with a Master’s in Agribusiness (MAB).
As in any business, it is important for farms to know what makes their business profitable. During his research, Winger looked at what factors affected farm financial success. These factors included: size, planting intensity, enterprise diversity, marketing, cost control, capitalization and location. He used a sample of Kansas farms to examine financial ratio averages and trends from 1995 through 2004. These ratios were compared to established nation-wide benchmarks to determine the robustness of those benchmarks.
Winger said, “My thesis was important because farmers need to understand how their farm compares to other farms and what they can do to be profitable.”
When he applied a sample of Kansas farms to established financial ratio benchmarks, he found Kansas farms are well capitalized and liquid, had moderate operational efficiency, but only low to moderate levels of profitability.
“The Kansas farms in the study compared well with the benchmarks; however there is room for those farms to improve profitability. Prior research shows that the most pervasive way to increase profits is through operational efficiency,” he said. “But farm operators define success differently; one producer may feel that maximizing the return on their investment is most important, while another may put more value on more intrinsic returns. The use of debt may be either a tool for financial success or ruin depending on their situation.”