The classical economist Adam Smith divided income into three categories: wages of labor, rent of the land and interest on capital. The profit margin of an enterprise is what is left over after wages, rent, and interest is paid. Wages are fairly straightforward; rent and interest are more complicated. I come from a gold rush family. My great grandfather and his brothers were mining attorneys. With the mines, every ounce of gold taken out of the claim was gone forever. So too is it with pastures and farmland when nutrients are removed from the soil from grazing, haying, or tillage, that is a cost that needs to be factored in when determining profitability. Unlike mining, we have the ability to make things better, we can in effect buy more land by improving its productivity. With interest, it is a price paid for risking losing the principle. That has to be factored in when making an analysis of how profitable an enterprise is.
Lawrence Lasater wrote that one of the great problems with American agriculture is that we account based on cash rather than an accrual basis which would force us to have a better idea of how profitable we really are.