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Cash Flow Budgeting Incorporating Monte Carlo Simulation

Author

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  • Davison, I.J.
  • Beasley, S.R.

Abstract

Cash flow budgeting remains one of the tried and tested management techniques available to farm management personnel. BUDGET GENERATOR (BG) is a computerised farm management aid which has been developed to calculate farm cash flow budgets using variable prices and yields. BG combines the traditional gross margin with a crop husbandry calendar to generate a cash flow budget. BG has a static mode which calculates cash flow budgets using pessimistic, expected and optimistic yield and price forecasts. BG also has a dynamic mode which uses Monte Carlo simulation to calculate the cash flow budget based on yield and price distribution estimates and assumptions on distribution characteristics. With BG an estimate of the cash flow of a single enterprise plan or a whole farm plan can be calculated as well as the variability associated with that cash flow.

Suggested Citation

  • Davison, I.J. & Beasley, S.R., 1993. "Cash Flow Budgeting Incorporating Monte Carlo Simulation," 9th Congress, Budapest, Hungary, 1993 346186, International Farm Management Association.
    • Handle: RePEc:ags:ifma93:346186
    DOI: 10.22004/ag.econ.346186
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    Keywords

    Farm Management; Agricultural Finance;

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