Agriculture Reference
In-Depth Information
information, she is not sure how to best use this information to answer tough management
questions including:
•
How much must Perfect Pallet sell to cover all costs?
•
What volume of business is necessary to generate a 10 percent ROE?
•
If prices are lowered by 5 percent to improve sales volume, will this be profi table?
•
Can we afford to hire a new salesperson?
•
Can Perfect Pallet afford new computer-controlled, electronic sawing equipment?
•
How should the board of directors be advised about which of several alternative expan-
sion investments is best for the business?
Some of these questions frame operating decisions, or decisions that have a shorter (usually
one year or less) time frame. Some of these questions frame investment decisions with
impacts that will last much longer than a single year. Regardless of focus, operating, or
investment, professional agribusiness managers view decision-making as a process and use
analytical tools to help make decisions whenever feasible. Then they complement formal
analyses and decision-making with their personal experience, judgment, and intuitive feel
for the situation. With greater access to many sources of information—both fi nancial and
marketing—managers today rely much more heavily on computer-generated spreadsheets
and database analysis systems to help them make more informed management decisions.
Plate 12.1
Ripple rings of water
Like ripples on a pond, many decisions made by agribusiness managers have consequences that
expand over time. Photo courtesy of USDA Natural Resources Conservation Service.
