Applications of financial ratio analysis to strategic farm management decisions : an historic appraisal

Abstract

The objective of this thesis is an introduction to the easy way in which a considerable amount of information can be gained from financial farm accounts using Financial Ratio Analysis. The main limitation of its implementation as a measure of financial performance for sheep and beef farms in New Zealand is imposed by inadequacies in the data available to analysts. There is a clear lack of an agreement between farm analysts, about accounting methods, ratio selection and standards of comparisons. However a general consensus prevails that single ratios present an inadequate perspective of changes in financial stress and the several measures are needed. A dynamic measure which may more closely reflect changes in farm families' expectations (utility) is examined in this study along with conventional financial ratios as indicators of appropriate management strategies for sheep and beef farms in New Zealand, through the period 1959-90.