Decomposition of changes in assets

There are three main changes that contribute to an increase or a decline in net assets: changes to the retention result, changes in the contributing capital and amendment to the market evaluation. A change in the profit is retained in a certain year, the amount of net income is kept in the shop. In addition to storing the business, the net income can be used for withdrawing the owner and paying income taxes. The net income includes both net profit and personal income. The change in capital contributions makes gifts, debts and capital contributions and distributions. The change in the market evaluation reduces the change in the postponed liabilities from the change in the market value of capital assets. The liabilities postponed represent an amount that is owe when an asset is sold. The pursuit of changes in net assets over time is one of the most important tasks of those who are responsible for analyzing the financial position and performance of a country. In this article, changes to net assets from 2007 to 2024 are examined using the sample of companies and this change is decomposed to its three components: received profits, contributed capital and market evaluation.

In this study, Finbin data was used for all harvest farms from 2007 to 2024. In particular, annual data from the owner of the owner of the owner for all harvest arms were summarized. Table 1 contains the average, standard, deviation and the coefficient of variation (standard deviation divided by the average) for changing net assets and its component over the period. The calculation of the profits obtained included both the net result and personal income. About 62% of the change in net assets can be attributed to received profits. Another 34% can be attributed to the change in the market evaluation. The remaining 4%contributed to the change in capital. The average annual increase in net assets was 9.5 percent.

In addition to the changes in the assets, Table 1 contains summary statistics for net arms, personal income and owner withdrawals. Personal income and withdrawal of the owner were much less variable than the net income or a maintenance profit. The ratio of the profit to net arms was approximately 0.75, which indicates that on average about 25% of net income in the shop was not maintained. On average, the net arm income corresponds to around 19 percent of the gross income. These percentages would vary significantly between individual farms.

Figure 1. Net fold income and received profits, 2007 to 2024
Source: Finbin database (all harvest arms)

Figure 1 shows the annual average net arm income and the winnings received for each year analyzed in this study. Obviously there is great variability in every measure. The net arm income was positive every year. However, the maintenance profit was negative in 2014, 2015 and 2024. The profits obtained are used to make term debt payments and make payments for capital assets. In years in which the profits received are low, current assets, especially cash, are used to make these payments.

Although not shown in a table or illustration, data for harvesting arms were analyzed with less than 1000 acres and more than 1000 acres. The average net arm income and a maintenance profit for companies with less than 1000 ACRES (more than 1000 ACRES) were $ 76,533 and $ 62,926 ($ 263,237 or $ 188,045). The gap between the net arm income and the income received was tighter for agricultural businesses with less than 1000 acres due to their increasing trust in personal (i.e. non-farm) income. The higher profit for the companies with more than 1000 hectares shows that these farms have more funds to repay debt and to pay payments for capital assets. Interestingly, every year were positive for the smaller farms. In contrast, the profit reserves for the larger farms in 2014, 2015 and 2024 were negative.

In summary, a large part of the change in net assets for a sample of companies that contribute to the Finbin database, which contributes to the profits, was attributed to maintained profits in the period 2007 to 2024. In view of the relatively large change in the land values ​​that occurred during this period, this indicates the strong financial performance that production agriculture has experienced since 2007. Future articles will examine the percentage growth of net assets for agricultural operators with low conditions with low and high debts for assets and examine the trends in sources and use of funds since 2007.

Quotes

Center for Farm Financial Management, University of Minnesota, Finbin website, accessed April 23, 2025.