Financial Analysis In The Irish Farming Industry Its Uses And Its Usefulness

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1.2 The Future Farm Manager

In an era of tight profit margins, effective financial management is key to survival in the industry, ‘the lending institutions will be running with the good farmers in the future, as the industry moves onto a healthier, more commercially based footing’ (Donald, 2003c, p. 97).

Maloney (1992, p. 13) suggests that efficient management will be a key determinant in remaining competitive in the industry, ‘our young farmers must have the economic, financial and technological competencies to cope with change’. Following the implementation of the ACOT recommendations, agricultural certificate courses were set up, now provided by Teagasc, the farm training body. Therefore, if a lack of education in the past were a difficulty in using financial information in farm management (hereafter referred to as financial analysis), as these Teagasc courses contain training in bookkeeping, one would expect a greater uptake of financial analysis among younger farmers.

1. 3 The Objectives Of The Thesis

Objective I: To empirically investigate the use of financial analysis in the farming industry, in comparison with traditional management best practice.

This thesis will investigate whether there is an empirical difference between the use of financial analysis in the current farming industry, as opposed to the emphasis placed on its use by previous farm business academics and general business academics.

According to ACOT (1981, p. 101):
… farmers’ problems, needs and pre-occupations must be effectively relayed back, firstly, to those points which can provide technical information or conduct the necessary research, and secondly to the education and training system in order that it adapt to changing conditions in the industry and make its programme more effective.
Therefore, the first objective of this thesis is to identify if a financial information usage gap exists, and what impact this has on farm management. The reasons for any deficiency in the use of financial analysis can be identified and discussed.
Objective II: To investigate whether empirical evidence suggests that financial analysis will become significantly more important to the farmer in the years to come.

The farmers who can afford to stay in the industry will be in a profit-constrained market where accurate planning, control and decision-making will be essential.

Research findings may suggest that the use of financial analysis needs to be reconciled with the importance of effective financial management to remain competitive in the future farming industry. Possible avenues of reconciliation can also be explored.

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