Capital Turnover Ratio

[LEP]

Good question, but when evaluating a business, you would have to use today's. But your working capital assuming you owned everything would look great. Also working capital to Gross.

If you rent all your land, the ratio looks great, but then working capital is substantially less.

You talk owned vs rented land and made an assumption about working capital which in my experience doesn't necessarily follow through. Profitability has everything to do with wc.

[tweety]

You talk owned vs rented land and made an assumption about working capital which in my experience doesn't necessarily follow through. Profitability has everything to do with wc.

The ratio does look better if you rent land. Your asset value is low and the gross is the same as if you owned everything. So with the renter, the ratio looks impressive (the denominator is smaller). It's not an assumption, it's math.

[LEP]

The ratio does look better if you rent land. Your asset value is low and the gross is the same as if you owned everything. So with the renter, the ratio looks impressive (the denominator is smaller). It's not an assumption, it's math.

You are referring to the Capital turnover ratio and I was talking about wc (working capital). Two different things.

[tweety]

You are referring to the Capital turnover ratio and I was talking about wc (working capital). Two different things.

Yes of course, trying to stay on topic.

[LEP]

Good question, but when evaluating a business, you would have to use today's. But your working capital assuming you owned everything would look great. Also working capital to Gross.

If you rent all your land, the ratio looks great, but then working capital is substantially less.

Your post was the first mention of wc in this thread.

You made some wild assumptions that if you rent land your wc is substantially less.

I know farmers with paid for farms that are struggling to make a living because of marginal profitability. As I stated before wc is the best indication of profitability.

Just pointing that out.

[tweety]

Your post was the first mention of wc in this thread.

You made some wild assumptions that if you rent land your wc is substantially less.

I know farmers with paid for farms that are struggling to make a living because of marginal profitability. As I stated before wc is the best indication of profitability.

Just pointing that out.

"If you rent all your land, the ratio looks great"

that being what the whole thread is about. Capital turnover ratio. Which is higher if you rent given the same land base as owning.

[tmyrfield]

"If you rent all your land, the ratio looks great"

that being what the whole thread is about. Capital turnover ratio. Which is higher if you rent given the same land base as owning.

Capital turnover ratio is more useful for large institution sector investment decisions.

which is when the CPP and OTF started buying farm land back in the day, when the capital turnover ratio was way lower. Now those fund managers will be looking at a different sector with lower ctrs, like, oh, TSLA and ev's....just kidding!

[tweety]

Capital turnover ratio is more useful for large institution sector investment decisions.

which is when the CPP and OTF started buying farm land back in the day, when the capital turnover ratio was way lower. Now those fund managers will be looking at a different sector with lower ctrs, like, oh, TSLA and ev's....just kidding!

It certainly does give a strong indication of whether or not someone with some assets should invest into farming or not. Or any size business for that matter. Just a single tool.