The financial distress of recent years has led to high debt loads on a number of fish farms. To determine whether the level of debt has become too high for the business to withstand, the farmer needs to examine financial statements referred to as balance sheets. The farmer should have his/her accountant prepare a balance sheet at least annually. The financial position of the business can then be determined by examining the balance sheet and its bottom line, net worth. The first indication of whether there is too much debt in the business is whether the net worth is positive. If positive, the business is considered to be solvent with a debt load that is probably not excessive. A second indication is to examine whether net worth has increased from one year to the next. This is a positive sign, indicating that the business is headed in the right direction. It is relatively common for new farms to have negative net worth in the early years. What is most important for new farms is to see continuous improvement in net worth each year. A series of financial ratios can be calculated to provide more detailed insight into whether the debt load in the farm business is excessive or not. The debt/asset ratio is one of the most useful in this regard. A debt/asset ratio above 1 indicates that the business is not solvent and that the debt load is too high. This does not necessarily mean that the business is not viable, but additional scrutiny may be needed to determine whether the business can recover from an excessive debt load.

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