Financial Management on Catfish Farms - TAA Online … · Financial Management on Catfish Farms to Improve Efficiencies and Profitability Carole R. Engle Aquaculture/Fisheries Center

Financial Management onCatfish Farms

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OVERVIEW OF INTENSIVE TRAINING MODULE:

Financial Management on Catfish Farms to Improve Efficiencies and Profitability

Carole R. EngleAquaculture/Fisheries CenterUniversity of Arkansas at Pine Bluff

SHORT & LONG-TERMFINANCIAL DECISIONS:Can it generate enough value

over time to pay off the debts (solvency)? Balance Sheets

Is it profitable in the long run?Is it profitable in the short run?Can it generate enough cash

when needed to pay the bills (liquid)?

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Financial Analysis: Key Statements

Financial Position Balance Sheet

Profitability Budgets Income Statement

Cash Flow/Liquidity Cash Flow Statement

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These need to be veryspecific,

Need to be based onthorough financial analysis of business.

What are your business goals

for 2011?

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WHAT DOES IT TAKE TOSURVIVE THE LONG RUN?Adequate financial strength:

-Is my financial positionstrong enough?

-Do I have too much debt to pull out of this?ADEQUATE FINANCIAL STRENGTHDETERMINED FROM THE BALANCE

SHEETEngle, UAPB

ADEQUATE PROFITABILITY

Enterprise budgets can beused to evaluate new

management strategies to see what the effect on profitability might be.

Income Statements measure profits & losses in a specific

year.Engle, UAPB

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WHAT DOES IT TAKE TOSURVIVE THE SHORT RUN?

•Must be able to sell fish at aprice that covers its variable costs, not necessarily all itstotal costs.

•Must have adequate liquidity.•Enough cash revenue to makepayments when due.

•Must have adequate cash flow.

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• Extensive planning.• Controlling: implementing

actions needed to meet goals.• Monthly monitoring ofCash flow statement -Deviations apparent.Corrective actions can be taken more quickly.

Essential Financial Management

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Balance Sheets: a Management Tool to Improve

Financial Position of the Business

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Carole R. EngleAquaculture/Fisheries CenterU. of Arkansas at Pine Bluff





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Short & long-term financial decisions:

• Can it generate enough value over time to pay off the debts (solvency)?– Balance Sheets

• Is it profitable in the long run?• Is it profitable in the short run?• Can it generate enough cash


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Balance Sheets:

Financial statement that measures

Financial Positionof the business.

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Balance Sheet:What is its bottom

line?

Net Worth!!

Same as Owner Equity!!

What is your business worth?

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Balance Sheet:Structure

Divided into:•Assets

–What is “owned”–Land, buildings–Equipment–Fish in ponds

•Liabilities–What is “owed”–Debts, loans, bills due at supply store.

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Balance Sheet:How is it organized?

Assets divided into:•Current

–Cash–Items to be sold this year

•Non-current–Items used in production–Equipment–Ponds

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Balance Sheet:Organization

Liabilities divided into•Current

–Bills due this year–Payments due this year

•Non-current–Payments due after this year, over next several years

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Balance Sheet for 256-acre Catfish Farm, December 31.

AssetsCurrent Assets

Checking account $15,849

Value of small fish in ponds $266,112

Non-current AssetsEquipment $387,570

Total Assets $1,003,890

Not all assets listed here – not enough room; Check the other training file for a complete balance sheet!

Not all assets listed here – not enough room; Check the other training file for a complete balance sheet!

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Liabilities

Current Liabilities

Payment due this year onequipment loan

$72,368

Payment due this year onpond construction loan

$38,216

Non-current Liabilities

Principal remaining onequipment loan

$168,858

Total Liabilities $534,214

Not all liabilities listed here – not enough room;Check other training files for more!

Not all liabilities listed here – not enough room;Check other training files for more!

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Total Assets $1,285,851

Total Liabilities - $534,214Net Worth = $751,637

•Net worth is positive.•Business is solvent.•If business were to be sold, areenough assets to pay off claims(liabilities)

•Over time, Net Worth shouldgrow, wealth grows.

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Financial Efficiency: Solvency

•Refers to the value of assets

owned by the business

compared to the amount of

liabilities owed.

•Indicates whether, if the

business were to be sold, if

there would be enough

capital to pay off the debts. Engle, UAPB

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Financial Ratios that Measure SolvencyRatio Interpretation

Change in net worth

Positive change shows business growth

Debt/asset ratio

Compares value of debt to assets. Smaller values better. Less than 1 meanssolvency.

Equity/asset ratio

Part of total assets financed by owner’s equity. Higher values preferred.

Debt/equityratio

Compares proportion of financing by lenders with that from owner. Lower values preferred.

Debt structure ratio

Compares amount of debt due this year to total debt.

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Solvency Measures for the256-acre Catfish Farm

Ratio ValueChange in net worth - $245,994

Debt/asset ratio 0.42

Equity/asset ratio 0.58

Debt/equity ratio 0.71

Debt structure ratio 0.21

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Financial Efficiency: Liquidity

• Liquidity is the ability of a business to meet cash flow obligations.

• It is important to keep financial transactions of the business running smoothly.

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Financial Ratios that Measure Liquidity

Ratio InterpretationCurrent ratio Quick indicator. The higher the value the

more liquid.

Workingcapital

Difference between current assets and current liabilities. In dollar values instead of a ratio.

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Liquidity Measures for the256-acre Catfish Farm

Ratio ValueCurrent ratio 2.55

Working capital $171,377

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How Are These Calculated?

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Spreadsheet Tutorialsare Available on this site in another file.

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• Exercise balance sheet, income statement, cash flow budgets

• Correct versions, the financial ratios, and

• A brief interpretation of each ratio and how to improve.

Tutorials include:

Carole R. EngleAquaculture/Fisheries Center

University of Arkansas at Pine Bluff

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One use of a balance sheet is toanswer the question of:

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Assets-current

277,287

Non-current 475,213Total 752,500Liabilities-current

242,168

Non-current 179,079

Total 421,247

Net Worth

Debt/asset

Year 1

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Assets-current

277,287


242,168

Non-current 179,079

Total 421,247

Net Worth 331,253

Debt/asset 0.56

Year 1

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Assets-current

277,287 217,868


242,168

Non-current 179,079

Total 421,247

Net Worth 331,253

Debt/asset 0.56

Year 1 Year 2

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Assets-current

277,287 217,868

Non-current 475,213 356,410Total 752,500Liabilities-current

242,168

Non-current 179,079

Total 421,247

Net Worth 331,253

Debt/asset 0.56

Year 1 Year 2

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Assets-current

277,287 217,868

Non-current 475,213 356,410Total 752,500 574,278Liabilities-current

242,168

Non-current 179,079

Total 421,247

Net Worth 331,253

Debt/asset 0.56

Year 1 Year 2

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Assets-current

277,287 217,868


242,168 411,686

Non-current 179,079 179,079

Total 421,247

Net Worth 331,253

Debt/asset 0.56

Year 1 Year 2

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Assets-current

277,287 217,868


242,168 411,686

Non-current 179,079 179,079

Total 421,247 590,765

Net Worth 331,253

Debt/asset 0.56

Year 1 Year 2

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Assets-current

277,287 217,868


242,168 411,686

Non-current 179,079 179,079

Total 421,247 590,765

Net Worth 331,253 -16,487

Debt/asset 0.56 1.03

Year 1 Year 2

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Catfish inventory= can affect balance sheet,net worth, and financial ratios.

Pond inventory estimation not precise. Depletion method. Feeding response alone does not work well. Very careful monitoring of all stocking,

feeding, & harvesting with continuousanalysis can get close.

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Experimental Trials: depletion estimates by weight were within 0-8% of actual and from 3.5-18% by number.

Commercial Pond Trials (19 ponds): 1-14% by weight and 0.3-2.4% by number (only 2 ponds estimated number).

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Evaluation of Trawl for Sampling &Inventory Estimation in Catfish Ponds

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The TrawlThe Trawl

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Assets-current

181,000

Non-current 1,643,855Total 1,824,855Liabilities-current

159,725

Non-current 1,068,506

Total 1,228,231

Net Worth 596,624

Year 1431-acre CatfishFarm

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Current ratio 1.13

Working Capital 21,275Equity/asset ratio 0.33Debt/asset ratio 0.67

Debt/equity ratio 2.06

Debt structure 0.13

Year 1431-acre CatfishFarm

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Assets-current

181,000 362,000

Non-current 1,643,855 3,588,710

Total 1,824,855 3,950,710

Liabilities-current

159,725 221,552

Non-current 1,068,506 1,369,506

Total 1,228,231 1,591,058

Net Worth 596,624 239,652

Year 1862-acre MergedCatfishFarm

Year 2

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Current ratio 1.13 1.63

Working Capital

21,275 140,448

Equity/asset ratio

0.33 0.60

Debt/asset ratio

0.67 0.40

Debt/equity ratio

2.06 0.67

Debt structure

0.13 0.14

Year 1862-acre MergedCatfishFarm

Year 2

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Income Statement


U. of Arkansas at Pine Bluff

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Profitability Measures• Profitability = Total revenues -

total costs

• A business that is both solvent and liquid will not necessarily be profitable.

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Income Statement (P&L)Profit & Loss Statement

Bottom line = Net Farm Income

• Budget units can be a pond• P & L for entire farm

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Income Statement:How is it structured?

Item ValueRevenue $806,400

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Item ValueRevenue $806,400Cash expenses $610,322

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Item ValueRevenue $806,400Cash expenses $610,322Depreciation $42,707

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Item ValueRevenue $806,400Cash expenses $610,322Depreciation $42,707Total operating expenses

$653,029

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$653,029

Cash interest paid $150,579

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$653,029

Cash interest paid $150,579Total expenses $803,608

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Item ValueRevenue $806,400Cash expenses $610,322Depreciation $42,707Total operating expenses $653,029Cash interest paid $150,579Total expenses $803,608Net farm income from operations

$2,792

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Profitability Measures• Primary measure of farm profitability is :

Net Farm Income

• Net Farm Income is a measure of the return to operator’s equity, capital, unpaid labor, and management.

• Net Farm Income can be distributed among the four principal factors of production: land, labor, capital, and management

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Gross Revenue “Pie”

NFI to operator forunpaid labor, equity

capital, & management

Interest to lenders for borrowed

money

Payments to suppliers for feed, seed,

etc.

Rent to owner for rented land

Employeewages

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Financial Indicators of How Much of Net Farm Income is Earned by Each

Factor of Production

Ratio Interpretation

Return to labor & management

Residual return to owner for labor & management input

Return to labor Portion of NFI remaining after subtracting out opportunity costs of capital & management

Return to management

NFI remaining after subtracting costs of capital and labor

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Financial Indicators of How Much of Net Farm Income is Earned by Each

Factor of Production


Rate of Returnto Assets

Can be compared to rates of return from other investments. Independent of financing.

Rate of Return on Farm Equity

Measures percent return to owner’s net worth or equity.

Operating Profit Margin Ratio (OPMR)

Measures the proportion of gross revenues left after paying expenses

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Financial Indicators from Income Statement for the 256-acre Catfish Farm

Ratio ValueReturn to labor & management $24,786

Return to labor $14,616

Return to management $10,140

ROA 10%

ROE -2%

OPMR 16%

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Spreadsheet Tutorialsare Available on this site in another file.

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Using Enterprise Budgets and Income Statements to Improve Efficiencies and Profitability of Catfish Farms


University of Arkansas at Pine Bluff

Income Statement:Cash-based Accounting

Item ValueRevenue $403,200Cash expenses $610,322Depreciation $42,707Total operating expenses $653,029Cash interest paid $150,579Total expenses $803,608Net farm income from operations

- $400,408

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Income Statement:Cash-based Accounting

Item 2010 2011

Revenue $403,200 $1,209,600

Cash expenses $610,322 $610,322

Depreciation $42,707 $42,707

Total operating expenses

$653,029 $653,029

Cash interest paid $150,579 $150,579

Total expenses $803,608 $803,608

Net farm income - $400,408 $405,992

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Income Statement:Accrual-based Accounting

Item 2010 2011

Revenue $403,200 $1,209,600

Change in fish inventory $403,200 - $403,200

Total Farm Revenue $806,400 $806,400

Total operating expenses $653,029 $653,029

Cash interest paid $150,579 $150,579

Total expenses $803,608 $803,608

Net farm income $2,792 $2,792

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What does it take to survive the short run?

•Must be able to sell fish at aprice that covers its variable costs, not necessarily all itstotal costs.

•Must have adequate liquidity.•Enough cash revenue to makepayments when due.

•Must have adequate cash flow.

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Fish Feed Prices

$150

$200

$250

$300

$350

$400

$450

$/t

on

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Realities of $300/ton FeedUAPB Base Budgets:

431-acre farm ($300/ton feed)

Farm Size Cost/VC

Cost/ TC

131-acre farm $0.63/lb $0.83/lb256-acre farm $0.64/lb $0.79/lb431-acre farm $0.64/lb $0.78/lb1,007-acre farm $0.64/lb $0.78/lb

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Realities of $350/ton FeedUAPB Base Budgets:

431-acre farm ($350/ton feed)

Farm Size Cost/VC

Cost/ TC

131-acre farm $0.69/lb $0.88/lb256-acre farm $0.70/lb $0.85/lb431-acre farm $0.70/lb $0.84/lb1,007-acre farm $0.70/lb $0.83/lb

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Breakeven Prices (based on budgets for 256-acre farm; $300/ton)

Above total cost $0.79

Above variable cost $0.64

Above cash costs (no debt capital)

$0.60

Above cash costs (100% debt op. capital)

$0.65

Above cash costs (50% debt long-term, no land; 100% debt op. capital)

$0.70

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What would happen with different feed and catfish

prices?

To maximize profits:

At low fish prices, feed rates and stocking rates would decrease.At low feed prices, feed and

stocking rates would increase.At high feed prices, feed and

stocking rates would decrease.Engle, UAPB

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Effects of Higher Fish Prices & Higher Feed Prices

Higher feed prices$$$ Lower stocking & feeding

Higher fish prices$$$ Higher stocking & feeding

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Profit-maximizing stocking densities at different fish &

feed prices.

01,0002,0003,0004,0005,0006,0007,0008,0009,000

fis

h/a

cre

$/ton

$0.70/lb $0.75/lb $0.80/lb

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How low should you go?

Model results dropped profit-maximizing stocking rates to 5,000/ac at $0.60/lb.

Farmers need to stock at rates that ensure financial payments are met.

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Fish grow faster at lower densities.

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Higher stocking rates produce higher yields of smaller fish.

May June July August Sept. Oct.

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Difficult to get good growth,

turnover

Densities need to stay within a feasible range.

5,500/acre

7,500/acre

Difficult to make debt payments on

ponds

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With High Feed Prices,

Essential to get as much gain out of every pound

of feed as possible.

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Feed Prices, Economics, & Profitability:

Feed Studies

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Breakeven prices across farm sizes, 2009 feed costs.

Farm size 32% protein ($343/ton)

28% protein ($322/ton)

BEP/VC BEP/TC BEP/VC BEP/TC

60-acre $0.67 $0.89 $0.65 $0.87

131-acre $0.68 $0.88 $0.66 $0.86

256-acre $0.69 $0.84 $0.67 $0.82

431-acre $0.69 $0.83 $0.67 $0.81

1,007-acre $0.69 $0.83 $0.67 $0.81

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Breakeven prices across farm sizes, 2009 feed costs.

Farm size 32% protein ($343/ton)

28% protein ($322/ton)

BEP/VC BEP/TC BEP/VC BEP/TC

60-acre $0.67 $0.89 $0.65 $0.87

131-acre $0.68 $0.88 $0.66 $0.86

256-acre $0.69 $0.84 $0.67 $0.82

431-acre $0.69 $0.83 $0.67 $0.81

1,007-acre $0.69 $0.83 $0.67 $0.81

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What About Every Other Day Feeding?

UAPB study: Yield of carryover fish was 757

lb/ac less when fed every otherday.

Feed fed was 4,778 lb/ac less.

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What About Every Other Day Feeding?

Feedcost

Net benefit

($0.65/lb)

Net benefit

($0.70/lb)

NetBenefit

($0.75/lb)$250/ton $106/ac $68/ac $30/ac$275/ton $165/ac $127/ac $89/ac$300/ton $225/ac $187/ac $149/ac$325/ton $285/ac $247/ac $209/ac$350/ton $344/ac $306/ac $268/ac

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What’s the Down Side to Every Other Day Feeding?

Understocked fish growvery poorly.

Every other day feedingbetter strategy for pondswith fish that are closer tomarket size.

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How do I look at my costs?

• Use the budget spreadsheets included in the training materials.

• Need to have EXCEL installed on your computer.

• Substitute your costs in and see the change in the breakeven costs and net returns.

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THERE ARE EXERCISES AVAILABLE ON THIS SITE IF

YOU WISH TO PRACTICE WHAT YOU HAVE LEARNED

ABOUT INCOME STATEMENTS BEFORE

MOVING ON TO THE LAST SEGMENT IN THIS MODULE.

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Using Cash Flow Budgets to Improve

Cash Flow & Liquidity in the Catfish Business


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Overview of Structure and Interpretation of Cash Flow Budgets

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Cash Flow Analysis: What Can It Be Used For?

• Use it to develop a plan for adverse conditions.

• Plan should consider budgeting enough to be able to feed to obtain adequate yields.

• Consider looking hard at fixed costs as way to reduce overall costs.

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Cash Flow Analysis: What Can It Be Used For?

• Whether there is a liquidity problem• Whether there is a cash shortfall in

particular months.• Whether the business can make its

payments on time.• What the cash position of the

business is.• If the operating line of credit is

adequate or not

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Cash Flow Analysis:What is the unit of analysis?

• Entire farm

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Cash Flow Analysis:How Can It Help?

• Analyze pattern of cash flow• Structure operating line of credit• Credit & loan applications• Decide on best timing for capital

purchases (equipment, land, etc.)• Look to improve timing of

purchases of supplies, inputs

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Cash Flow Analysis: StructureItem January February

Total cash inflow $611,090 $628,406

Total cash outflow $14,940 $50,848

Cash available $596,150 $577,548

New borrowing 0 0

Ending cash balance $596,150 $577,548

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Cash Flow Analysis: SructureItem January February

Beginning cash $578,834 $596,150

Total cash outflow $14,940 $50,848

Cash available $596,150 $577,548

New borrowing 0 0

Ending cash balance $596,150 $577,548

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Cash Flow Analysis:Total Cash Inflow

Item January February

Beginning cash $578,834 $596,150

Receipts from catfish sold

$32,256 $32,256


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Cash Flow Analysis:Operating cash expenses


Feed $2,783 $5,565

Fingerlings 0 $36,416

….. ….. …..

Total operating expenses

$14,940 $50,848

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Cash Flow Analysis: Debt ServicingItem January February

Real estate loan

Principal 0 0Interest 0 0

Equipment


Operating loan


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Cash Flow Analysis:Summary of Debt Outstanding


Real estate 0 0

Equipment 0 0

Operating 0 0

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Cash Flow Analysis with 50% of catfish off-flavor and 30% financed.

Item July August


Total cash outflow

$80,239 $99,766

Cash available - $16,852 - $49,446

New borrowing $26,852 $59,446

Ending cash balance

$10,000 $10,000

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Cash Flow Analysis:Summary of Debt Outstanding

Item July August

Real estate 0 0

Equipment 0 0

Operating $103,259 $145,340

Payments are made on operating line of credit in each of these months because there is a lien on the fish sold.

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Liquidity Measures for 256-acre Catfish Farm


InterestCoverage Ratio

Relates interest to firm’s ability to service debt. How much of firm’s returns to assets available per dollar of interest. Higher ratios more favorable.

Cash Flow Coverage Ratio

Extent that excess cash provides cushion for covering debt-servicing. Higher ratios more favorable.

Debt-servicingratio

Cash required for interest and principalpayments. Lower ratios show lower debt burden.

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Measures of Cash Flow Risk for 256-acre Catfish Farm

Cash flow risk measure

Percent farm revenue can decline and still meet cash flows

Percent farm expenses can increase and still meet cash flows

Percent interest rates can increase and still meet cash flows

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Liquidity Measures for 256-acre Catfish Farm

Ratio Value

Interest Coverage Ratio 0.14

Cash Flow Coverage Ratio 5.63

Debt-servicing ratio 0.18

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Measures of Cash Flow Risk for 256-acre Catfish Farm

Cash flow risk measure Value

Percent farm revenue can decline and still meet cash flows

0.45

Percent farm expenses can increase and still meet cash flows

0.009

Percent interest rates can increase and still meet cash flows

0.26

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How Are These Calculated?• The training materials include

spreadsheets with: exercise balance sheet, income statement, cash flow budgets

• The correct versions, the financial ratios, &

• Includes a brief interpretation of each ratio and how to improve it.

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Using Cash Flow Budgets to Improve Cash Flow and Liquidity in the Catfish Business


Monthly Cash Flow BudgetItem Jan Feb Mar Apr May Jun Jul Aug Sep Oct

Beginning Cash 15,849.00 39.79 42,835.71 12,065.73 46,466.02 24,256.90 1,145.96 34,568.03 5,806.26 36,263.66 Receipts from catfish sold 60,000.00 60,000.00 60,000.00 60,000.00

Cash Inflow 15,849.00 60,039.79 42,835.71 72,065.73 46,466.02 24,256.90 61,145.96 34,568.03 65,806.26 36,263.66 Operating Cash Expenses

Fingerlings - - 12,415.00 - - - - - - - Feed 3,830.00 4,790.00 5,750.00 6,710.00 7,670.00 8,620.00 10,540.00 11,500.00 14,370.00 9,580.00 Gas, Fuel, and Oil 380.00 470.00 570.00 660.00 750.00 850.00 1,040.00 1,130.00 1,410.00 940.00 Chemicals - - 470.00 - - 470.00 - 620.00 - - Labor 1,000.00 1,000.00 1,730.00 1,730.00 1,730.00 1,950.00 1,950.00 1,950.00 1,950.00 1,730.00 Harvesting & Hauling 717.39 722.79 806.91 692.32 687.24 681.21 695.49 754.85 701.20 729.46 Machine Hire - - - - - 150.00 150.00 290.00 150.00 - Office Expenses 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 Rent 360.00 360.00 360.00 360.00 360.00 360.00 360.00 360.00 360.00 360.00 Repairs and Maintenance 1,310.00 1,310.00 1,310.00 1,310.00 1,310.00 1,310.00 1,310.00 1,310.00 1,310.00 1,310.00 Utilities 190.00 390.00 970.00 1,360.00 1,560.00 2,340.00 2,530.00 2,730.00 2,920.00 2,340.00 Other Operating Costs 360.00 360.00 360.00 360.00 360.00 360.00 360.00 360.00 360.00 360.00

Total Operating Expenses 8,157.39 9,412.79 24,751.91 13,192.32 14,437.24 17,101.21 18,945.49 21,014.85 23,541.20 17,359.46 Fixed Cash Expenses

Taxes and Insurance - - - 4,760.00 - - - - - - Total Fixed cash Expenses - - - 4,760.00 - - - - - - Living Expenses 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00 Other Expenses - - - - - - - - - - Scheduled Debt Payments

Real Estate Principal 265.00 - - 265.00 - - 265.00 - - 265.00 Interest (10% APR) 2,368.75 - - 2,364.33 - - 2,357.71 - - 2,351.08

Equipment Principal - 665.00 - - 665.00 - - 665.00 - - Interest (10% APR) - 2,108.23 - - 2,097.14 - - 2,080.52 - -

Operating Principal - - 1,000.00 - - 1,000.00 - - 1,000.00 - Interest (10% APR) 2,018.07 2,018.07 2,018.07 2,018.07 2,009.73 2,009.73 2,009.73 2,001.40 2,001.40 2,001.40

Total Cash Outflow 15,809.21 17,204.08 30,769.98 25,599.72 22,209.11 23,110.94 26,577.93 28,761.77 29,542.60 24,976.94 Cash Available 39.79 42,835.71 12,065.73 46,466.02 24,256.90 1,145.96 34,568.03 5,806.26 36,263.66 11,286.72 New Borrowing - - - - - - - - - - Cash Balance 39.79 42,835.71 12,065.73 46,466.02 24,256.90 1,145.96 34,568.03 5,806.26 36,263.66 11,286.72

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Cash Flow Scenarios

Farm A Farm B

Sept. $60,000 Feb. $60,000

Oct. $90,000 April $60,000

Nov. $60,000 July $60,000

Dec. $60,000 Sept. $60,000

Nov. $30,000

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Liquidity Measures for Two Scenarios

Indicator A B

Cash Flow Coverage (0.26) 0.17

Debt-Servicing 0.21 0.17

Cash avail./cash inflow

(0.02) 0.01

Cash avail./op. expenses

(0.03) 0.02

Cash avail./liabilities (0.01) 0.01

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Adequate Cash Flow:Determined from Cash Flow Budget• Cash flow budget must show realistic

projections of cash revenue for the year, by month.

• Any month with a negative cash flow is a cash flow problem that needs to be resolved.

• Must identify a production/financial plan that generates the revenue when needed.

• If there is a problem, may need to selloff some stock, reduce densities,allow for better growth = better cash flow.

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• Decisions on stocking and feeding rates should be based on meeting short-term financial obligations.

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What should I look at this winter?

• Do detailed cash flow budget and know when you need to make payments.

• Using Fishy, project different harvest dates at different stocking & feeding rates.

• Choose feeding and stocking rates that allow farmer to make necessary payments.

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Larger fish at stocking reach harvest in shorter time period.

May June July August Sept. Oct.

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Fish grow faster at lower densities.

Engle, UAPB

Cash Flow Simulator:

Files available in training materials on

web site.

Engle, UAPB

Documents

Financial Management on Catfish Farms - TAA Online … · Financial Management on Catfish Farms to Improve Efficiencies and Profitability Carole R. Engle Aquaculture/Fisheries Center