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Assessment of Farm Business Health and Long-Run Forward Planning: Experiences with the Top Management Farm Business Simulation Model

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  • Schoney, R.A.

Abstract

As farms become larger and more capital intensive, long-run forward planning and risk assessment become increasingly more important. The Top Management Farm Business Simulator is designed to assist producers in assessing the profitability and risk of alternative farm business opportunities. This is done in three steps: prognosis, diagnosis and prescription. Prognosis is based on projecting business income, cash flows and net worth over periods of up to 15 years. Farm business health is assessed based on the ability of the firm to generate positive cash flows and a reasonable return to equity within an acceptable level of risk. Diagnosis is based on the comparison of firm cost efficiency and financial structure to peer performance benchmarks. Prescriptive analysis is based on the comparison of the risk-return efficiency of the base scenario to up to seven business alternatives. Risk efficiency tests include first and second degree stochastic dominance and stochastic dominance with respect to a function.

Suggested Citation

  • Schoney, R.A., 1997. "Assessment of Farm Business Health and Long-Run Forward Planning: Experiences with the Top Management Farm Business Simulation Model," 11th Congress, University of Calgary, Canada, July 14-19, 1997 346442, International Farm Management Association.
    • Handle: RePEc:ags:ifma97:346442
    DOI: 10.22004/ag.econ.346442
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    Keywords

    Farm Management;

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