Financial management practices and farm profitability

TLDR

The study investigates how New York dairy farms adopt basic financial management practices and how this adoption relates to farm profitability. Researchers estimated the prevalence of business‑analysis/control, investment‑analysis/decision‑making, and capital‑acquisition practices among these farms. While many practices, such as net‑present‑value analysis, are rarely used, farms that employ investment‑analysis techniques show significantly better financial performance.

Abstract

The adoption of several basic financial management practices is examined for a group of New York dairy farms. The study provides estimates of the extent to which various business analysis and control, investment analysis and decision making, and capital acquisition practices have been adopted. Many practices, such as net present value analysis, are not widely adopted by farmers. The relationship between the adoption of financial management practices and farm profitability is also examined. Results suggest that the adoption of financial management practices, such as using investment analysis techniques, significantly impacts farm financial performance.