Financial Management in Agriculture / Edition 7

by Peter Barry

Overview

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

ISBN-13:	2900135037590
Publication date:	12/29/2010
Pages:	416
Product dimensions:	8.30(w) x 10.80(h) x 0.70(d)

Table of Contents

	Preface	v
Section 1	Introduction
1.	Nature and Scope of Financial Management	3
	The Financial Function	3
	Risk and Time	5
	Tools of Financial Management	6
	Structural Characteristics of Agricultural Finance	10
	Implications of Risk and Liquidity
2.	Managerial Goals	21
	Goal Identification	21
	Life Cycle of the Firm	34
Section 2	Financial Analysis, Planning, and Control
3.	Financial Statements and Information Flows	41
	An Agricultural Accounting Perspective	42
	Coordinated Financial Statements	43
	Projecting Financial Performance	66
	Computer Technology	82
	Accounting for Income Tax Obligations	83
4.	Financial Analysis and Control	91
	The Financial Control Process	91
	Characteristics of Goal Measures	94
	The Tools of Financial Analysis	95
	Explaining Changes in Ratios	121
5.	Financial Planning and Feasibility Analysis	133
	An Overview of Financial Planning	133
	Financing Current Assets	135
	Financing Depreciable Assets	140
	Financing Fixed Assets	142
	Repayment Plans	143
	Sources for Loan Repayment: An Example	145
	Analyzing Debt Structure	148
	Analyzing Financial Feasibility	148
Section 3	Capital Structure, Liquidity, and Risk Management
6.	Capital Structure, Leverage, and Financial Risk	159
	Capital Costs and Leverage	160
	Firm Growth in Agriculture	166
	Financial Leverage and Firm Growth	168
	Leverage and Risk	172
	The Leverage Choice	178
	Proprietor Withdrawals	178
	Resource Productivity and Growth	179
	External Financing	180
	Market Demand	181
7.	Liquidity, Lender-Borrower Relationships, and Credit Evaluation	187
	Needs for Liquidity	188
	Sources of Liquidity	190
	Credit Concepts and Borrowing Behavior	194
	Lender-Borrower Relationships	197
	Determinants of Credit and the Cost of Borrowing	199
	The Credit Profile	203
	Lender Preferences and Resource Allocation	206
	Credit Evaluation and Scoring Procedures	208
8.	Risk Management	219
	A Risk Management Perspective	220
	Fundamentals of Diversification	221
	Diversification, Risk, and Financial Servicing Capacity	229
	Enterprise Diversification in Agriculture	233
	Marketing Alternatives	235
	Flexibility	237
	Financial Responses to Risk	238
Section 4	Capital Budgeting and Long-Term Decision Making
9.	The Time Value of Money	249
	Concepts of Time Value	249
	Compound Interest	250
	Future Value of a Present Sum	251
	Present Value of a Future Payment	252
	Applications of Single-Payment Formulas	254
	Annual Interest and Compounding	256
	Present Value of a Series of Payments	257
	Present Value of a Uniform Series	258
	Present Value of an Infinite Uniform Series	259
	Future Value of a Series of Payments	260
	Future Value of a Uniform Series	261
	Applications of Series Formulas	262
	Present Value of a Constant-Growth Series	264
	The Effects of Time and Interest Rates on Present and Future Values	266
	Review of Formulas	269
10.	Capital Budgeting Methods	273
	Identification of Alternatives	273
	Capital Budgeting Methods	274
	Data Needs	288
	Analysis and Interpretation: A Capital Budgeting Application	294
Appendix	Capital Budgeting Using the Weighted Average Cost of Capital	308
11.	Capital Budgeting: Inflation, Risk, and Financial Planning	315
	Inflation and Capital Budgeting	315
	Risk and Capital Budgeting	320
	Financial Feasibility of Single Investments	325
	Comparing Investments with Different Economic Lives	330
Appendix	Asset Replacement	336
12.	Controlling Farm Land	343
	Characteristics of Farm Land	343
	Alternatives in Land Control	344
	Land Values	345
	Analyzing Land Investments	351
	Financial Feasibility of Land Investments	364
	Leasing Farm Land	367
13.	Leasing Non-Real Estate Assets	379
	Types of Leases	379
	Issues in Capital Leasing	383
	Economics of Leasing	389
14.	Costs of Financial Capital	401
	Money Costs of Debt Capital	401
	Noninterest Money Costs	409
	Methods of Computing Interest	410
	Effects of Balance Requirements	414
	An Application: Determining the Money Costs of Debt Capital	415
	Other Costs	418
	Costs of Equity Capital	421
	Using Costs of Financial Capital	424
Section 5	Financial Markets for Agriculture
15.	Financial Intermediation in Agriculture	429
	Financial Markets	429
	An Historical Perspective	430
	Importance of Financial Intermediation	432
	Evolution of Financial Markets for Agriculture	435
	Credit Sources for Agriculture	436
	Equity Capital	439
	Conceptualizing Financial Intermediation	440
	Identifying Financial Intermediaries	443
	The Regulatory Environment	447
	Competition in Financial Markets	448
16.	The Management Environment for Financial Intermediaries	455
	Asset--Liability Management	455
	Gap Management and Interest Rate Risk	458
	Duration Gap and Interest Rate Risk	460
	Other Risk Management Techniques	463
	Loan Pricing	464
17.	Financial Intermediaries in Agriculture	473
	Commercial Banks	474
	Farm Credit System	485
	Life Insurance Companies	502
	Trade Credit	503
	Individuals and Seller Financing	509
	Farm Service Agency	511
	Federal Agricultural Mortgage Corporation (Farmer Mac)	513
	Commodity Credit Corporation	516
18.	Policy Issues Affecting Financial Markets for Agriculture	523
	Monetary and Fiscal Policies	523
	International Financial Markets	528
	Evaluating Financial Intermediation in Agriculture	532
	Regulatory Issues and Credit Policies	536
Section 6	Other Topics
19.	Legal Aspects of Agricultural Finance	549
	Contracts	549
	Notes	550
	Real Versus Personal Property	550
	Transactions Secured by Real Property	552
	Transactions Secured by Personal Property	555
	Foreclosure and Bankruptcy	559
	Co-ownership of Agricultural Property	560
	Other Negotiable Instruments	561
	Documents of Title for Goods in Storage or Transit	562
	Other Legal Instruments and Terminology	564
20.	Business Organization in Agriculture	569
	Evaluative Criteria	569
	Organizational Alternatives	572
Appendix	Estate Taxes: Implications for Farmers	587
21.	Outside Equity Capital in Agriculture	593
	The Role of Outside Equity Capital	593
	Equity Capital and Limited Partnerships	595
	Equity Capital and Corporations	597
	Basic Steps in Going Public	602
	Equity Capital and Mergers	604
22.	Market Structure of Agriculture: Contracts, Integration, and Financing	609
	Stages of the Food and Fiber System	609
	Types of Vertical Coordination	611
	Extent of Vertical Coordination	613
	Casual Developments in Vertical Coordination	615
	Financing Implications	617
	Appendix	623
	Glossary (Terms Used in Agricultural Finance)	643
	Indexes	665

Editorial Reviews

A textbook for undergraduate and beginning graduate students who are assumed to have some acquaintance with microeconomic principles and with statistics. Barry is joined by Paul N. Ellinger, C. B. Baker (all U. of Illinois-Urbana-Champaign) and John A. Hopkin (Texas A&M U.) to develop and apply concepts, analytical methods, and descriptive information for managers of farms. They particularly point out how economics in agriculture differ from that in other industries because of the risk factors, and special financial institutions and lending programs. Earlier editions were published between 1973 and 1995. Annotation c. Book News, Inc., Portland, OR (booknews.com)

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