This article examines the current ratio trends of Illinois grain farms using data obtained from the Illinois Farm Business Farm Management (FBFM). It builds upon our previous analysis (farmdoc daily, December 4, 2023) of the working capital trends of Illinois grain farms to provide further insights into their financial health. The current ratio is a measure of liquidity that assesses a farm's ability to meet its short-term financial obligations as they become due. It is calculated by dividing the value of a farm's current assets1 by its current liabilities2. In other words, it measures a farm’s ability to pay off its short-term liabilities with its short-term assets. According to the Farm Financial Scorecard3 developed by the Center for Farm Financial Management, a farm with a current ratio that is less than 1.3 is categorized as vulnerable, a ratio between 1.3 and 2.0 is categorized as cautionary, and a ratio that is greater than 2.0 is categorized as strong. Therefore, the higher the current ratio, the more liquid the farm is.
