Many producers do a balance sheet each year because their lender requires it. Yet they never calculate their return on equity, says Kevin Dhuyvetter, agricultural economist, Kansas State University. Calculating your ROE will tell you how well your business performed during the year. When calculated over time, it’s also an effective way to judge where you should invest money in your business.
Use this formula to calculate ROE:
ROE = Ending net worth – Beginning net worth
Beginning net worth