Financial Management in Agriculture, Sixth Edition

Financial Management in Agriculture, Sixth Edition

By Peter J. Barry, Paul N. Ellinger, John A. Hopkin, & C. B. Baker, Interstate Publishers, Inc., 2000, 679 pp., Hardbound 42.95

Most readers will recognize this sixth edition of Financial Management in Agriculture as an updated of an already excellent textbook that focuses on planning, analyzing, and controlling business performance in production agriculture firms and on the special financial institutions and lending programs that contribute to the uniqueness of agricultural finance.

Except for the addition of one new chapter, Chapter 22, the basic content and organization of the sixth edition is nearly identical to the fifth edition. Section headings and chapter titles are identical with the exception of Chapter 7, Liquidity, Lender-- Borrower Relationships, and Credit Evaluation, previously titled, Liquidity and Credit, and the aforementioned new chapter, Chapter 22, Market Structure of Agriculture: contracts, Integration, and Financing. The book's intended audience stays the same: undergraduate and beginning graduate students, who are assumed to have some acquaintance with microeconomic principles and statistics

Like the fifth edition, the sixth edition is divided into six major sections: (1) Introduction (two chapters), (2) Financial Analysis, Planning, and Control (three chapters), (3) Capital Structure, Leverage, and Financial Risk (three chapters), (4) Capital Budgeting and Long-Term Decision Making (six chapters), (5) Financial Markets for Agriculture (four chapters), and (6) Other Topics (four chapters). The two chapters in Section One address the nature and scope of financial management and the financial goals that drive managerial behavior. The three chapters that compromise Section Two cover the recording and reporting of financial information, financial analysis and control, and financial planning and feasibility analysis. Section Three's three chapters are devoted to capital structure, leverage, and financial risk, liquidity, lender-borrower relationships, and credit evaluation, and risk management. Section four's six chapters account for slightly more than 25 percent of the book's content. Topics range from time value of money; capital budgeting and investment to issues related to controlling assets like land and machinery and equipment. The final chapter of Section Four examines costs of financial capital. The four chapters in Section Five offer an updated look at recent policy, managerial, and regulatory changes affecting the financial markets and institutions serving the credit needs of agriculture. Discussions of commercial banks, the Farm Credit System, Farmer Mac, financing by agribusinesses, and other lenders are also updated and extensively documented. The four major topics covered in the Sixth and last section of Financial Management in Agriculture include legal aspects of lending, business organization, market structure, and outside sources of equity capital in agriculture. Each chapter ends with a summary that highlights the major points of each chapter. Students will find this very helpful as a means to a focus on the content of the chapters. As a teacher, the summary is useful in guiding classroom activities and assessing student progress. Topics for discussion or "thought questions" are also included at the end of the chapters. I find these especially helpful when they are presented as problems to be solved by students. Each chapter also contains useful references for academics (including graduate students) and practitioners of agriculture finance. The end of the book contains an excellent glossary of terms. There are also two appendices at the end of the book: (1) a standard normal probabilities table and (2) time value of money interest factor tables.

Students with little or no background in farm accounting or financial statement preparation will have difficulty understanding the material in Chapter 3, Financial Statements and Information flows. Although the authors provide a sample case study for students to follow as they read Chapter 3, the explanation that accompanies that sample illustration lacks the necessary detail for a clear understanding of how each financial statement is prepared. Chapter 3 could be strengthened if the authors would provide more entry-by-entry detail about how each statement was generated.

For users of the fifth edition, a major question is whether to adopt the updated sixth edition or stay with the fifth edition. My recommendation would be "to adopt." Here are three reasons. (1) The sixth edition provides updated material on financial markets and financial intermediaries lending to agriculture. These markets and institutions have changed dramatically in the five years since the fifth edition was published. (2) This newest edition can be quickly and easily adapted by users of the fifth edition. (3) Where appropriate, the authors have updated figures, tables and examples to the latest available at the time the book was prepared.

Despite rather minor criticisms, the authors continue to provide one of the best, if not the best, introductory textbooks available for those academics with the responsibility for teaching junior, senior, and beginning graduate level university agriculture finance courses. At the advanced graduate level, this text is probable best suited as a review or secondary text. I also endorse it for anyone looking for a very useful reference on the broad topic of financial management in agriculture.

Kim Harris

Associate Professor

Department of Agribusiness Economics

Southern Illinois University

Carbondale, IL

Copyright North American Colleges and Teachers of Agriculture Sep 2002
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