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Operating Risk Analysis For Agricultural Investments

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  • Camelia Burja

Abstract

Decisions for substantiating the investments projects in agricultural sector are based on the assessment of the business's profitability but also, of the economic risk assumed by the enterprisers. The paper presents a dynamic analysis model of the operating risk which is validated in a case study using an example of an agricultural holding from viticulture. The appreciation of the economic risk is based on the Degree of operating leverage indicator, and the proposed analysis model offers the possibilities to identify the factors which can lead to an adequate management of risk. The case study presented validates the theoretical approach and highlights that the economic risk diminished due to modification of costs structure, flexibility of activity, variation of safety margin, sales and profit.

Suggested Citation

  • Camelia Burja, 2012. "Operating Risk Analysis For Agricultural Investments," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 2(14), pages 1-15.
    • Handle: RePEc:alu:journl:v:2:y:2012:i:14:p:15
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    References listed on IDEAS

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    1. Dugan, Michael T. & Minyard, Donald H. & Shriver, Keith A., 1994. "A re-examination of the operating leverage-financial leverage tradeoff hypothesis," The Quarterly Review of Economics and Finance, Elsevier, vol. 34(3), pages 327-334.
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    More about this item

    Keywords

    operating risk; agriculture; investment; degree of operating leverage;
    All these keywords.

    JEL classification:

    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • O22 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Project Analysis
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance

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