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Financial ratio analysis using ARMS data

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Author Info

  • Bruce L. Ahrendsen
  • Ani L. Katchova

Abstract

Purpose – The purpose of this research is to evaluate the financial performance measures calculated and reported by the Economic Resource Service (ERS) from Agricultural Resource Management Survey (ARMS) data. The evaluation includes the calculation method and the underlying assumptions used in obtaining the reported values. Recommendations for improving the information reported are proposed to ERS. Design/methodology/approach – The financial measures calculated and reported are compared with those recommended by the Farm Financial Standards Council (FFSC). The underlying assumptions are identified by analyzing the software code used in calculating the values reported. The values reported by ERS are duplicated and alternative methods for calculating the financial performance measures are considered. The values obtained from the various calculation methods are compared and contrasted. Findings – Recommendations for ERS include: calculate and report the financial measures recommended by FFSC, note values that are imputed, periodically update and validate assumptions used in calculating imputed values, review its policy for flagging estimates as statistically unreliable, report medians and other select percentiles, and consider reporting the percent of farm businesses that have values within critical zones. Originality/value – A total of four methods for calculating financial performance measures are compared and contrasted. These are the aggregate mean, sample mean, sample median, and percentage of farm businesses with values in critical zones.

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Bibliographic Info

Article provided by Emerald Group Publishing in its journal Agricultural Finance Review.

Volume (Year): 72 (2012)
Issue (Month): 2 (July)
Pages: 262-272

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Handle: RePEc:eme:afrpps:v:72:y:2012:i:2:p:262-272

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Web page: http://www.emeraldinsight.com

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Related research

Keywords: ARMS; Critical zone; Farm business; Farms; Financial performance; Financial ratio; Imputation; Performance measures;

References

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  1. Jaclyn D. Kropp & Ani L. Katchova, 2011. "The effects of direct payments on liquidity and repayment capacity of beginning farmers," Agricultural Finance Review, Emerald Group Publishing, vol. 71(3), pages 347-365, November.
  2. Kropp, Jaclyn D. & Katchova, Ani L., 2011. "The Effects of Direct Payments on Liquidity and Repayment Capacity of Beginning Farmers," Staff Papers 164516, University of Kentucky, Department of Agricultural Economics.
  3. Ashok Mishra & Christine Wilson & Robert Williams, 2009. "Factors affecting financial performance of new and beginning farmers," Agricultural Finance Review, Emerald Group Publishing, vol. 69(2), pages 160-179, July.
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Cited by:
  1. Paul N. Ellinger & Bruce L. Ahrendsen & Charles B. Moss, 2012. "Balance sheet and income statement issues in ARMS," Agricultural Finance Review, Emerald Group Publishing, vol. 72(2), pages 247-253, July.

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