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Financial Management in Agriculture / Edition 6

Financial Management in Agriculture / Edition 6

by Peter Barry, Paul Ellinger, John A. Hopkin, C. B. Baker

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ISBN-10: 081343176X

ISBN-13: 9780813431765

Pub. Date: 09/15/1999

Publisher: Prentice Hall

Financial Management in Agriculture, Seventh Edition, introduces students to modern concepts and tools of finance, developed and applied to the agricultural sector. Using case studies, practical problems, and a lucid presentation, the text focuses on planning, analyzing, and controlling business performance in agriculture and related


Financial Management in Agriculture, Seventh Edition, introduces students to modern concepts and tools of finance, developed and applied to the agricultural sector. Using case studies, practical problems, and a lucid presentation, the text focuses on planning, analyzing, and controlling business performance in agriculture and related financial markets. This new edition addresses recent structural changes in the food system, covering important topics such as the growth in vertical coordination within the food and fiber system, and the significant implications for financial analysis and risk management by those managing or financing the agricultural sector.

Product Details

Prentice Hall
Publication date:
Edition description:
Product dimensions:
6.97(w) x 10.02(h) x 1.41(d)

Table of Contents

Section 1Introduction
1.Nature and Scope of Financial Management3
The Financial Function3
Risk and Time5
Tools of Financial Management6
Structural Characteristics of Agricultural Finance10
Implications of Risk and Liquidity
2.Managerial Goals21
Goal Identification21
Life Cycle of the Firm34
Section 2Financial Analysis, Planning, and Control
3.Financial Statements and Information Flows41
An Agricultural Accounting Perspective42
Coordinated Financial Statements43
Projecting Financial Performance66
Computer Technology82
Accounting for Income Tax Obligations83
4.Financial Analysis and Control91
The Financial Control Process91
Characteristics of Goal Measures94
The Tools of Financial Analysis95
Explaining Changes in Ratios121
5.Financial Planning and Feasibility Analysis133
An Overview of Financial Planning133
Financing Current Assets135
Financing Depreciable Assets140
Financing Fixed Assets142
Repayment Plans143
Sources for Loan Repayment: An Example145
Analyzing Debt Structure148
Analyzing Financial Feasibility148
Section 3Capital Structure, Liquidity, and Risk Management
6.Capital Structure, Leverage, and Financial Risk159
Capital Costs and Leverage160
Firm Growth in Agriculture166
Financial Leverage and Firm Growth168
Leverage and Risk172
The Leverage Choice178
Proprietor Withdrawals178
Resource Productivity and Growth179
External Financing180
Market Demand181
7.Liquidity, Lender-Borrower Relationships, and Credit Evaluation187
Needs for Liquidity188
Sources of Liquidity190
Credit Concepts and Borrowing Behavior194
Lender-Borrower Relationships197
Determinants of Credit and the Cost of Borrowing199
The Credit Profile203
Lender Preferences and Resource Allocation206
Credit Evaluation and Scoring Procedures208
8.Risk Management219
A Risk Management Perspective220
Fundamentals of Diversification221
Diversification, Risk, and Financial Servicing Capacity229
Enterprise Diversification in Agriculture233
Marketing Alternatives235
Financial Responses to Risk238
Section 4Capital Budgeting and Long-Term Decision Making
9.The Time Value of Money249
Concepts of Time Value249
Compound Interest250
Future Value of a Present Sum251
Present Value of a Future Payment252
Applications of Single-Payment Formulas254
Annual Interest and Compounding256
Present Value of a Series of Payments257
Present Value of a Uniform Series258
Present Value of an Infinite Uniform Series259
Future Value of a Series of Payments260
Future Value of a Uniform Series261
Applications of Series Formulas262
Present Value of a Constant-Growth Series264
The Effects of Time and Interest Rates on Present and Future Values266
Review of Formulas269
10.Capital Budgeting Methods273
Identification of Alternatives273
Capital Budgeting Methods274
Data Needs288
Analysis and Interpretation: A Capital Budgeting Application294
AppendixCapital Budgeting Using the Weighted Average Cost of Capital308
11.Capital Budgeting: Inflation, Risk, and Financial Planning315
Inflation and Capital Budgeting315
Risk and Capital Budgeting320
Financial Feasibility of Single Investments325
Comparing Investments with Different Economic Lives330
AppendixAsset Replacement336
12.Controlling Farm Land343
Characteristics of Farm Land343
Alternatives in Land Control344
Land Values345
Analyzing Land Investments351
Financial Feasibility of Land Investments364
Leasing Farm Land367
13.Leasing Non-Real Estate Assets379
Types of Leases379
Issues in Capital Leasing383
Economics of Leasing389
14.Costs of Financial Capital401
Money Costs of Debt Capital401
Noninterest Money Costs409
Methods of Computing Interest410
Effects of Balance Requirements414
An Application: Determining the Money Costs of Debt Capital415
Other Costs418
Costs of Equity Capital421
Using Costs of Financial Capital424
Section 5Financial Markets for Agriculture
15.Financial Intermediation in Agriculture429
Financial Markets429
An Historical Perspective430
Importance of Financial Intermediation432
Evolution of Financial Markets for Agriculture435
Credit Sources for Agriculture436
Equity Capital439
Conceptualizing Financial Intermediation440
Identifying Financial Intermediaries443
The Regulatory Environment447
Competition in Financial Markets448
16.The Management Environment for Financial Intermediaries455
Asset--Liability Management455
Gap Management and Interest Rate Risk458
Duration Gap and Interest Rate Risk460
Other Risk Management Techniques463
Loan Pricing464
17.Financial Intermediaries in Agriculture473
Commercial Banks474
Farm Credit System485
Life Insurance Companies502
Trade Credit503
Individuals and Seller Financing509
Farm Service Agency511
Federal Agricultural Mortgage Corporation (Farmer Mac)513
Commodity Credit Corporation516
18.Policy Issues Affecting Financial Markets for Agriculture523
Monetary and Fiscal Policies523
International Financial Markets528
Evaluating Financial Intermediation in Agriculture532
Regulatory Issues and Credit Policies536
Section 6Other Topics
19.Legal Aspects of Agricultural Finance549
Real Versus Personal Property550
Transactions Secured by Real Property552
Transactions Secured by Personal Property555
Foreclosure and Bankruptcy559
Co-ownership of Agricultural Property560
Other Negotiable Instruments561
Documents of Title for Goods in Storage or Transit562
Other Legal Instruments and Terminology564
20.Business Organization in Agriculture569
Evaluative Criteria569
Organizational Alternatives572
AppendixEstate Taxes: Implications for Farmers587
21.Outside Equity Capital in Agriculture593
The Role of Outside Equity Capital593
Equity Capital and Limited Partnerships595
Equity Capital and Corporations597
Basic Steps in Going Public602
Equity Capital and Mergers604
22.Market Structure of Agriculture: Contracts, Integration, and Financing609
Stages of the Food and Fiber System609
Types of Vertical Coordination611
Extent of Vertical Coordination613
Casual Developments in Vertical Coordination615
Financing Implications617
Glossary (Terms Used in Agricultural Finance)643

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