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Ratios - Who Cares?

Sadly, the money people care.  The lenders care about ratios.

Other people you owe money to don't care.  They just want to get paid.  Your spouse doesn't care.  S/he just wants to know there will be money for living.  The kids don't care, they just want the most fun school you can afford.

For many of us, asset turnover ratio, operating expense ratio, depreciation expense ratio and interest expense ratio are numbers that make the eyes glaze over.

When academics and even borrowers talk to me about ratios, how many farmers get lost?  Farmers I know do the best they can with what they have.  Many of us are small enough that any change in a ratio can spike it apparently out of control.

I guess what I'm saying is we try to spend less than we earn, we try to buy equipment that makes us money and we try to not get too strung out on debt.  Most of us don't need ratios for that.

 

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