The asset coverage ratio sets the equity in relation to the fixed assets of a farm. Fixed assets are machines, buildings and land.
Assets Ratio = Equity x 100 : Fixed Assets
A high degree of asset coverage means that large parts of the assets are financed by equity and not by credit "on the spot".
The equity ratio indicates the share of equity in total capital.
Equity Ratio = Equity x 100 : Total Assets
A high equity ratio is considered positive: the farm is financed primarily by its own resources and does not have to resort to borrowing.
Farms often face the decision to invest or invest capital. Return on equity indicates whether an investment was profitable.
Return on Equity = Profit x 100 : Equity
If the return on equity is above the current interest rate, the investment in the own yard was worthwhile.
The debt capital ratio is set in relation to the total capital:
Debt Ratio = Borrowed x 100 : Total Assets
The lower the share of debt in total capital, the more financially independent the court is. It then finances itself primarily from its own capital reserves (equity capital).
Debt Coverage = ( Depreciable Investment Property + Animal Wealth + Current Assets ) x 100 : Borrowed
High leverage means that large parts or all of the debt can be repatriated through rapidly disposable assets.
Liquidity describes the Court's ability to settle debts with available funds.
Liquidity = Current Assets x 100 : Borrowed
The higher the liquidity, the better the solvency of a farm. Liquidity is therefore also considered as a measure of impending insolvency.
To calculate the total return (return on total capital), profit and interest on debt capital are set in relation to equity.
Total capital profitability = ( Profit + Lending Rates ) x 100 : Equity
The return on total capital provides information on how high the income from invested total capital will be.
Formulas and descriptions of debitor