A lot of producers do a balance sheet every year because their lender requires it. But then they never calculate their return on equity, says Kevin Dhuy-vetter, an agricultural economist at Kansas State University. Calculating your ROE will tell you how well your business performed during the year. And when calculated over time, it’s also a good way to judge where to invest money in your business.
Use this formula to calculate ROE:
ROE = (ending net worth – beginning net worth) ÷ beginning net worth