Agricultural Financial Risk Analysis

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					                                              EA 508
                 Agricultural Financial Management-Analysis and Methods

                                           Spring 2003

Location:              112 Animal Sciences           Time:          MWF 12 noon

Instructors:           Sue Hine                      Offices:       Hine, B325
                       Dawn Thilmany                                Thilmany, B313

Phone:                 491-7370, Hine                 E-mail:
                       491-7220, Thilmany                 

Office Hours:          2-3 pm Monday or Tuesday, or by appointment.

Grading:               30% Homeworks/Computer Labs
                       35% Quizzes
                       35% Project

Text:                  Financial Management in Agriculture
                       Barry, Ellinger, Hopkin and Baker, 6th Edition

Course Objective: To develop an understanding of how financial management and strategy
affect the overall performance of the firm. We will cover how to use financial statements for
managerial and valuation issues, investment analysis methods and issues as well as current issues
affecting agricultural finance institutions and research. Journal, business publication and media
readings (including Web-based materials) are assigned to illustrate current trends and forces
shaping the agricultural, national and global finance sectors.

The research project/paper will be on a subject of interest to the student, with no limitations
except for having a connection with some current issue or analytical method associated with
agricultural finance. Expectations for the project will be discussed further within the first month
of class.

Topics to be Covered:
   I.      Financial Statements and Analysis (2 Weeks)-Thilmany
   II.     Capital Structure: Debt, Growth and Risk (2 Weeks)-Thilmany
   III.    Portfolio Investment Theory (6 Weeks)-Hine
           a. Capital Budgeting
           b. Stock Market Securities
           c. Fixed Income Securities
   IV.     Financial Management of Assets: Machinery and Land (1 Week)-Thilmany
   V.      Option Valuation (1 Week)-Thilmany
   VI.     Agricultural Finance Institutions and Issues (2 Weeks)-Hine and Thilmany
   VII. Presentation of Projects to Class (1 Week)
January 20-No Class Monday
 Introduction to Agricultural Financial Management and Financial Statements
                Chapters 1 through 3 in Barry et al

January 27
Analyzing Financial Statements: Ratios and Trends
              Chapter 4 in Barry et al
              Analysis of Farm and Agribusiness Financials

February 3
Financial Planning and Feasibility: Capital Structure’s Effects on Growth and Risk
               Chapters 5 & 6 in Barry et al

   Forster, D. Lynn. “Capital Structure, Business Risk, and Investor Returns for
   Agribusinesses.” Agribusiness, Vol. 12, No. 5, 429-442 (1996)

   Barry, Peter J., Ralph W. Bierlen, and Narda L. Sotomayor. “Financial Structure of Farm
   Businesses Under Imperfect Capital Markets.” American Journal of Agricultural
   Economics, 82(4) (November 2000):920-933

February 10
Risk Management Issues
            Chapter 8 in Barry et al
            Linear Programming, Optimal Portfolio Problem

       Lence, Sergio H. “Using Consumption and Asset Return Data to Estimate Farmers’
       Time Preferences and Risk Attitudes.” American Journal of Agricultural Economics,
       82(4) (November 2000): 934-947

February 17
      Financial Analysis Due
      Review and Quiz I

February 24-April 11 Portfolio Investment Theory

       Readings to be assigned

March 17
Financial Issues for Agribusiness Corporations

   Ding, John Y. and Julie A. Caswell. “Changes in Diversification Among Very Large Food
   Manufacturing Firms in the 1980s.” Agribusiness, Vol. 11, No. 6, 553-563 (1995)
   Patterson, Michael D. and Marvin L. Hayenga. “INDUSTRY NOTE, Valuing Intangible
   Assets: Newark and Beyond.” Agribusiness, Vol. 11, No. 4, 371-381 (1995)

   Siebert, John W., Robert Jones, and Thomas L. Sporleder. “The VEST Model: An
   Alternative Approach to Value Added.” Agribusiness, Vol. 13, No. 6, 561-567 (1997)

March 24-March 31
Capital Budgeting Methods and Issues: Option Valuation
       Chapters 9-13 in Barry et al.
       Dixit and Pindyck, Investment Under Uncertainty, Chapters 1-3

Capital Budgeting Application: Computer Lab of Complete Investment Analysis

       Clark, J. Stephen, Murray Fulton, and John T. Scott, Jr. “The Inconsistency of Land
       Values, Land Rents, and Capitalization Formulas.” American Journal of Agricultural
       Economics, 75(1) (February 1983):147-155.

       Lamb, Russell L. and Jason Henderson. “FAIR Act Implications for Land Values in
       the Corn Belt.” Review of Agricultural Economics, Vol. 22, No. 1:102-119.

April 7
Costs of Financial Capital: Farm and Corporate Level
       Chapter 14 in Barry et al

April 14-21
Current Issues in Agricultural Finance
   Chapters 17,18 and 22 in Barry et al

   Sherrick, Bruce J., Steven T. Sonka, and James D. Monke. “Nontraditional Lenders in
   Agricultural Credit Markets.” Agribusiness, Vol. 10, No. 4, 341-357 (1994)

   Moss, LeeAnn McEdwards, Peter J. Barry, and Paul N. Ellinger. “The Competitive
   Environment for Agricultural Bankers in the U.S.” Agribusiness, Vol. 13, No. 4, 431-444

April 30- May 4
Project Reports

May 9
Projects will be due by 5:00 p.m.

Description: Agricultural Financial Risk Analysis document sample