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4 Useful Tools to Evaluate Farm Profitability and Financial Performance

by | Feb 25, 2021

Different FINPACK Credit Analysis tools are geared towards different information sources, especially related to the financial analysis of agricultural credits. The type and timing of data sources directs what path you should follow for credit analysis purposes. 

1. Schedule F Cash to Accrual

Items required to utilize tool:

Schedule F Cash to Accrual in FINPACK Credit Analysis requires the completion of a Schedule F Tax Form and “bookend” balance sheets, meaning a beginning and ending balance sheet for the farm’s fiscal year.  For calendar year tax filers, a balance sheet dated December 31 or January 1 is necessary.  Additionally, the Schedule F Analysis – Additional Input form helps gather customer information not directly found on the Schedule F tax form.  Having these four pieces of information allows for the calculation of accrual adjusted income.  The net cash income for the farm operation for the year is adjusted for inventory changes between the beginning and ending balance sheet.  If the balance sheet data is prepared on a date different than fiscal year end, the analysis will not be accurate.  For farmers, many transactions typically take place around year end.  Therefore, it is important to have properly timed data sources in this analysis process, do make sure everything connects.

2. Earned Net Worth Analysis

Items required to utilize tool:

  • Beginning and ending balance sheets for analysis period

Earned Net Worth Analysis is a more flexible FINPACK Credit Analysis tool that allows the user to analyze the earned net worth change of a farm or business when the available data is two balance sheets that are about a year a part.  It may be difficult to get fiscal year end balance sheets from customers for a variety of reasons. Additionally, farmer’s tax return may not be completed in time to make credit renewal decisions. With this in mind, FINPACK Credit Analysis has developed the Earned Net Worth Analysis tool.  This tool utilizes those “time of renewal” balance sheets to evaluate earned net worth and term debt coverage performance for the time period between the two balance sheets.  Additionally, net farm income can be derived with a bit more data, including non-farm income, family living expenses, and taxes paid.  The goal with this financial analysis tools is to evaluate earned net worth and market valuation change from the total net worth change for the period.

3. Global Cash Flow

Items required to utilize tool:

  • Tax return for each business and individual for analysis year(s)

The Global Cash Flow analysis tool in FINPACK Credit Analysis uses tax returns to evaluate the repayment ability for each business, individual, and guarantor involved in the global lending relationship.  The analysis calculates global debt coverage for all businesses and individuals/guarantors included in the analysis.  This allows lenders to best evaluate more complex customers that have multiple entities and individuals involved in the total lending relationship.

4. FINAN Financial Analysis

Items required to utilize tool:

  • Farm record detail for analysis year
  • Beginning and ending balance sheets for analysis year

The Financial Analysis (FINAN) tool in FINPACK Credit Analysis is a robust analysis tool allowing for a detailed look at both whole-farm and enterprise-level profitability.  This tool requires more time and effort to complete the detailed analysis.  Therefore, lenders utilize this tool less often in their work.  Many farmers complete a FINAN for their operation or are working with a farm business management education program to complete this work.  If desired, a lender can add the annual FINAN to their own FINPACK Credit Analysis file by importing the data from the farm customer’s FINPACK file.


FINPACK Credit Analysis offers a number of tools that can be used to evaluate farm profitability and financial performance.  Utilize the financial analysis tool best suited to the customer situation, data received, and credit analysis activities of your financial institution.

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