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SW Ohio | Solvency (owner equity), Profitability (debt coverage ratio) and Liquidity (could be a wide range i.e. working capital/current ratio/etc.) measure is one that banks look at to determine an approval on an operating, land or equipment loan.
- Rule of thumb, you need 20% minimum of liquidity. My definition of liquidity is working capital (current assets - current liabilities) divided by gross farm income.
- i.e. Farmer has $200,000 CA and owes $100,000 CL = $100,000 WC. Farmer operates 500 acres and grosses $250,000. His liquidity is $100,000 / $250,000 = 40%
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Line of credit limits
