INITIAL ANALYSIS
The steps to analyze the overall financial position and performance of a farm are:
1. Gain an overview of the farm.
2. Identify the vision, goals, objectives, and standards of the farm.
Vision, goals, objectives, and standards are compared against actual performance and plans.
3. Check the accuracy of the records.
To trust the results of the analysis, we must trust the initial information used for the analysis.
4. Prepare the financial statements.
Once the records are deemed accurate (that is, accurate enough), the three main financial statements should be prepared.
5. Evaluate profitability.
6. Evaluate solvency.
Solvency evaluates the asset-liability balance at a particular point in time.