AN ANALYSIS OF FINANCIAL LEVERAGE FOR SELECTED MICHIGAN FARM TYPES

James W. Manley

No 11173, Graduate Research Master's Degree Plan B Papers from Michigan State University, Department of Agricultural, Food, and Resource Economics

Abstract: Price variability for agricultural products in the 1970's has been increased greatly by drastic reductions in reserves, changing government programs for numerous domestic commodities, unstable foreign demand, and devaluation of the dollar. This riskier market environment has created management problems, at least for those managers with highly financially leveraged operations. There is a need to evaluate the effects of financial leverage in an environment wrought with market risks. This study answers for three typical Michigan farm types the following questions: 1) How do different financial leverage rations affect profitability, equity, and the ability to service debts? and 2) Can prudent hedging on the commodity futures market effectively reduce the risk inherent in the use of financial leverage?

Keywords: Agricultural; Finance (search for similar items in EconPapers)
Pages: 46
Date: 1978
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Persistent link: https://EconPapers.repec.org/RePEc:ags:midagr:11173

DOI: 10.22004/ag.econ.11173

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