University of Maryland Extension

profit

Summary

Urban Ag home | Table of contents Understand profit and cash flow is paramount to the success of the business. Profitability measures the amount of farm income generated from sales of goods and services over and above the expenses required to generate that income. An income statement is used to...

Example farm cash flow

Urban Ag home | Table of contents Figure 4 illustrates the cash flow for the farm in the previous example. The income statement is also included to contrast the similarities and the differences in these two financial statements. Compare these financial statements with the formulas in figure 3 . The...

Income & expenses versus inflow & outflows

Urban Ag home | Table of contents Figure 3: The calculations to determine profit and cash are similar, but include different kinds of income and expenses. The text of this section explains these differences, marked by numbers in the figure and the text to help you refer back and forth. A cash flow...

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...

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...

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...

Setting profit goals

Urban Ag home | Table of contents Sometimes farmers focus on production and marketing and at the end of a season hope that there is a sufficient profit. However, good managers will set profit goals right along with production and marketing goals and focus on all three throughout the production...

What is profit?

Urban Ag home | Table of contents Profit is the calculation of income minus expenses. Urban farms produce crops, livestock, and other products for sale which generates income. To produce these products, inputs are required such as seed, compost, feed, labor, machinery, structures, etc. Subtracting...

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