What does it do?
This provides an estimate the the overall return of the farm business to total and equity in the form of cash and all fixed factors including buildings, land and equipment value.
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Information used
The information used in this calculation includes:
- total revenue
- total variable costs
- fixed costs
- depreciation
- interest charges
- tax rate
- cash available
- accounts receivable
- inventory value
- equipment value
- property value
- accounts payable
- short term debt
- long term debt
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Forumlae
Return on equity = (net income)/(owner's equity)
Net income = income - tax
Income = (gross margin - fixed costs - depreciation) - interest
Owner's equity = assets - liabilities
Assets = (cash + accounts receivable + inventory) + (equipment + property)
Liabilities = (accounts payable + short term debt) + (long term debt)
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