Analyzing Financial Statements – Trends Agribusiness.

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Presentation transcript:

Analyzing Financial Statements – Trends Agribusiness

Trends Think of some trends among the people in this classroom Now think of some trends among the people in the school. What are some community trends? Which of these trends provide a positive influence? Which of these trends provide a negative influence?

Trends Just as there are trends in society that are both positive and negative, there are positive and negative trends that effect an agribusiness. In this lesson, you will learn what trends are, and what they mean as far as evaluating financial statements and improving the health of the agribusiness.

What is a trend The definition of a trend is: A trend is a general direction in which something tends to move, a general tendency or inclination. The definition of a trend in the agribusiness is: A term usually applied to changes in production, prices of agricultural prices, or the direction of the financial health of a business.

Financial Statements and Trends What are some financial statements do we use to track the trends of the agribusiness? Net Worth Statement Current Asset Statement Non-Current Asset Statement Current Liability Statement Non Current Liability Statement Current and Non-Current Expense Statement Current and Non-Current Income Statement The easiest way to track trends is to use Ratios.

Trends Trends should be evaluated over time using ratios. Trends can be evaluated on a short term basis The best evaluation of trends is conducted over a period of years – this provides the most complete picture. Trends should show positive growth and improvement of the health of an agribusiness. If the trend does not show positive growth, further investigation of the agribusiness is required.

Example of using ratios to create a trend Debt-toEquity Ratio and trend Trend Example # :1 2:1.1 2:1.4 2:1.72:1.9 In the above scenario the debt-to-equity trend is showing an improvement over time. This shows that the health of the business is improving. The producer is investing more money over time into his business than his creditors. Trend Example # :1 2:1.1 2:.9 2:.87 2:.5 In the above scenario the debt-to-equity trend is showing a decline over time. This shows that the health of the business is not improving. The producer is investing less money over time into his business than his creditors.

Review Trends can be used to make educated management decisions in the Agribusiness Trends are best utilized evaluating ratios over a period of time (preferably years) Trends are developed using ratios that are derived from several financial statements.