Introduction

A considerable amount of attention has been given to the measurement of the financial characteristics of farm businesses. The American Bankers Association formed the Farm Financial Standards Task Force (now Farm Financial Standards Council) to make recommendations regarding standards for farm financial reporting and analysis. The recommendations from the council outline the terminology, ratio computation and interpretation to be used in farm financial analysis. When data are available, the financial characteristics reported in this publication follow the recommended format.

For many years, Robert Morris Associates (RMA) has produced comparative historical financial data for a wide range of businesses. These data have aided businesses, lenders and other professionals in establishing guidelines for the financial analysis of a specific business. This study provides similar information for farm businesses. The format and procedures used to calculate the financial measures resemble those used by RMA. This study continues the research initiated in the publication Financial Characteristics of Illinois Farms: 1985-86.

The purpose of this study is to describe the financial performance and characteristics of a sample of Illinois farms. The composite attributes and distribution of the data are described followed by a set of tables which contain common-size financial statements and widely used financial ratios. Each of the tables is grouped into categories based on size, type, tenure, age and financial structure of the farm business. This grouping serves three main purposes. First, an individual can compare his or her farm operation and performance measures to farms with similar characteristics. Second, lenders and other parties can use the data as benchmarks in credit evaluations and other financial analyses. Third, the tables provide information about the aggregate structure and performance of the farm sector.

Because the farms in the data base are from the Midwest, the financial measures included on the tables are not intended to be absolute norms for the farm sector; rather, the intention is to set up some general guidelines for analysis of farm businesses.