Source: FARM DOC DAILY, UNIV. OF ILLINOIS, 10/18/17


Metrics that can be used to measure farm profitability include earnings before interest, taxes, and amortization (EBITA), net farm income, the operating profit margin ratio, return on assets, and return on equity. Each of these measures has its advantages and disadvantages. When focusing on operating profit, and not capital gains on assets, the operating profit margin serves as a useful measure for both internal and external benchmarking. However, if we want to include capital gains on assets in our financial performance metrics, return on assets and return on equity are preferable. This article examines trends in return on assets and its components for the U.S. farm sector.

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