Farmer sits on back of UTV talking to loan officer about his farm's balance sheet

Balance Sheets 101: Everything You Need to Know

Understand what you own, what you owe and what’s possible for your operation.

Test Your Knowledge

Woman completing her farm balance sheet at a desk in her office

Why Your Balance Sheet Matters More Than You Think

Your balance sheet isn’t just paperwork—it’s your farm’s financial report card. It gives you a clear snapshot of your operation’s health and helps you make smarter decisions for the future. Here’s why it’s essential:

See the Big Picture: Know your overall financial position at a glance.
Stay Loan-Ready: A strong balance sheet builds credibility with your lender.
Plan with Confidence: Make informed choices about acquiring new land and equipment.
Avoid Surprises: Stay on top of repayment ability and cash flow.
Spot Opportunities: Identify areas to strengthen before making big moves.

Balance Sheet Worksheet

Want a clearer picture of what a farm balance sheet really shows?

Start with a real-world example. Our easy-to-read sample balance sheet, paired with a straightforward glossary of terms, helps you:

Make Sense of the Numbers: See how assets, liabilities and equity come together in a complete, real-life financial snapshot.
Understand Key Terms Quickly: Use the glossary to decode financial language with no accounting background required.
Learn How Lenders Interpret Financials: Get insight into what your lender looks for when reviewing a balance sheet.
Build Confidence in Your Financial Knowledge: Familiarize yourself with the structure and meaning behind each section so you can talk about your operation’s financial health with ease.

Download the example balance sheet and glossary to better understand how farm financials work and what they can reveal about your operation.

Take a Closer Look at a Real Balance Sheet

Understanding your financials starts with seeing how the pieces fit together. Explore our free example balance sheet and glossary to learn what each section means and how lenders interpret those numbers.

Download Our Example Balance Sheet

Watch & Learn

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Test Your Balance Sheet Knowledge!

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This game is for educational purposes only and is designed to help users build a basic understanding of balance sheet concepts. It does not constitute financial advice, accounting certification, or professional training. Ledger Lane Farms is a fictional setting created to make learning more engaging. Asset and liability amounts may not accurately represent current costs or asset worth. Real-world financial decisions should be made with the help of a qualified accountant or financial advisor.

Balance Sheet Ratios and Terminology

Equity Asset Ratio

Shows your solvency, which is how much of your operation you truly own.

DCR equal net income plus depreciation plus term interest divided by term interest plus term principal

Debt Coverage Ratio (DCR)

Indicates how much you have left over after your debts are paid for the year.

Working capital divided by value of farm production

Working Capital to Value of Farm Production Ratio

Measures your liquidity relative to your farm size.

Gross Farm Income (GFI)

The total income your operation earns before any expenses are deducted.

Liquidity

Measures your working capital capital to value of farm production or GFI relative to farm size.

Value of Farm Production (VFP)

For most grain farmers, VFP will be their GFI. For cattle farmers, VFP will be GFI minus feed costs and purchases for reasale.

From Our Customers

My balance sheet is like a snapshot of my farm on paper, what I own, what I owe and where I stand. Reviewing it with my Financial Officers keeps us aligned and makes the numbers simple.

Jamen

Indiana

I pushed to align our balance sheet with Farm Credit Mid-America's format, because that's what they are looking at. Being on the same page makes borrowing easier.

Cali

Kentucky

Traditional banks didn’t understand how farms or balance sheets work—but Farm Credit Mid-America did. They know the realities of farming and helped me get the financing I needed.

Dave

Ohio

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Mar 17, 2023 – Business Insights

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Sep 30, 2021 – Business Insights

Don’t Make These Four Mistakes With Your Farm’s Working Capital

While calculating your working capital, be sure to avoid these common pitfalls

Aug 25, 2020 – Business Insights

Navigating Your Balance Sheet Through Challenging Times

Taking a closer look at your balance sheet now can help producers set a better course for the future.

* Loans and leases are subject to credit approval. Additional terms and conditions may apply. Farm Credit Mid-America is an equal opportunity lender.

AgDirect® is an equipment financing program offered by Farm Credit Services of America and other participating Farm Credit System Institutions with lease financing provided by Farm Credit Leasing Services Corporation. AgDirect® loans are not eligible for patronage from Farm Credit Mid-America.

Farm Credit Mid-America territory includes Arkansas, Indiana, Kentucky, Missouri, Ohio and Tennessee. Arkansas includes Clay, Craighead, Crittenden, Cross, Desha (northeast of the White River), Greene, Lee, Mississippi, Phillips, Poinsett, and St. Francis counties. Missouri includes Carter, Ripley and Wayne counties. Kentucky excludes Ballard, Calloway, Carlisle, Fulton, Graves, Hickman, Marshall and McCracken counties. Ohio excludes Crawford, Hancock, Lucas, Marion, Ottawa, Sandusky, Seneca, Wood and Wyandot counties. We serve all counties in Indiana and Tennessee.

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