University of Maryland Extension

Economic assessment and risk management

Cash flow periods

Urban Ag home | Table of contents Cash flow usually covers the same production period as the income statement but cash flow is almost always broken down into smaller time periods such as a quarter or a month. For each period, the cash flowing out of the business is subtracted from the cash flowing...

What is cash flow?

Urban Ag home | Table of contents Another important economic measurement is cash flow. Cash flow is closely related to profitability but there are significant differences. While profit is concerned with the income versus expenses for a production period such as a calendar year, cash flow is...

How to improve farm profits?

Urban Ag home | Table of contents Generating profits should influence most decisions as a farm manager. Many things affect the level of profit. This, in turn, determines remuneration for the operator’s management & labor, the growth potential of the farm business, and the ability to pay off...

Calculating profits for taxes

Urban Ag home | Table of contents An income statement is the one financial form that is required by the Internal Revenue Services for all farm businesses. It is used to calculate profit for tax purposes. The IRS version of an income statement is Schedule F (Form 1040) Profit or Loss From Farming (...

Example farm income statement

Urban Ag home | Table of contents The example farm is a part time small urban farm where the owner works nights and weekends on a 10,000 square foot plot (a little smaller than ¼ acre) in the city. The plot is intensely cultivated with a variety of vegetables produced in high tunnels and raised...

Historical versus projected income statements

Urban Ag home | Table of contents Income statements should be constructed for both historical analysis of farm profits and projecting future profits. The past year is always a good baseline for projecting profits for the next year. Figure 1 illustrates an income statement for an example farm. It...

Using an income statement to calculate and project profit

Urban Ag home | Table of contents To calculate your farm profit from the past year or project the profit for the coming year, you summarize income and expenses on an income statement or projected income statement, sometime called profit-and-loss statement or statement of activities. The income...

What is enterprise profit?

Urban Ag home | Table of contents We have discussed profits in relation to the whole farm. Since you likely produce several agricultural products, you can view each different crop or livestock enterprise as a separate profit center so you can determine which enterprises contribute more to the...

Calculating the profit

Urban Ag home | Table of contents When you subtract out variable/operating, fixed/overhead, and depreciation expenses from the income, the result is profit. With the profit, you can pay yourself (If you haven’t already expensed a salary for yourself), grow the business, and pay down debt principal...

Depreciation

Urban Ag home | Table of contents Producing crops and livestock often requires machinery, structures, and other capital items which add to the expenses of the farm. Since these items last for several years, you do not subtract the entire cost for use of equipment and structures in the year they are...

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