2 BULLETIN 920, U. S. DEPARTMENT OF AGRICULTURE. 
far completed by the United States Department of Agriculture. For 
the farms studied these results show: 
That comparatively few farmers make large profits. 
That a considerable number of them are making but a bare living. 
That most of them make a labor income of less than $500 per year, 
over and above the things the farm furnishes toward the family 
living, which, however, constitute an important factor. 
That their average return on investment after deducting the value 
of their own labor was about 34 per cent prior to 1916 and about 7 
per cent for the years 1917-18. 
In considering the business status of farming certain character- 
istics of the farm business should be kept clearly in mind. In the 
first place, farming is an individual business, operated and managed 
largely by individuals who vary widely in knowledge, ambition, and 
desires, and in their standards of living. Moreover, the farmer is 
not merely a laborer. He has money invested, and should receive 
interest on his investment and also pay for directing the business. 
Another characteristic of the farm business that should be con- 
sidered in a discussion of farm profits is the peculiarly close relation 
of the home to the business. From an abstract accounting stand- 
point it may be possible to separate entirely the farm business from 
the home, but in reality it occupies an important place in the farmer’s 
mind in weighing the advantages of farming as compared with those 
of other lines of business. , 
Again, the prospect of an increase in the value of land has been a 
factor that has made many farmers content to accept a low rate of 
interest from the actual operation of the farm. As a matter of fact, 
a number of farmers are not making more than 2 to 3 per cent on 
investment, but in many areas the increase in land values has tended 
to otfset this low return. 
NotEe.—Certain terms used in this bulletin are here defined: 
Farm capital.—The value at the beginning of the farm year of all real estate, machinery, live stock, and 
other investment used to carry on the farm business. It includes the value of the farm dwelling, but not 
of the household furnishings. 
Receipts.—The amount received from the sale of crops, the increase from stock, and the receipts from 
outside labor, rent of buildings, etc. The increase from stock is found by subtracting the sum of the amount 
paid for stock purchases and the inventory value at the beginning of the year from the sum of the receipts 
from stock products, sales of live stock, and the inventory value at the end ofthe year. Ifthe value of crops 
‘or supplies on hand at the end of the year was greater than at the beginning, the difference is considered a 
receipt. 
Expenses.—The amount of money paid out during the year to carry on the farm business, together with 
the value of the unpaid labor performed by members of the family. Ifthe value of crops or supplies at the 
end of the year was less than at the beginning, this was considered an expense. Household or personal 
expenses are not included. 
Farm income.—The difference between receipts and expenses. It represents the amount of money 
available for the farmer’s living above the value of family labor, provided he has no interest to pay on mort- 
gages or other debts. 
Labor income.—The amount that the farmer has leit for his labor after 5 per cent interest on the farm 
capital is deducted from the farm income. It represents what he has earned as a result of his year’s labor 
after the earning power of his investment has been deducted. In addition to labor incomes the farmer 
receives a house to live in, fuel (when cut from the farm), garden products, milk, butter, eggs, etc., as well 
(Note continued on p, 3.) 
