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Measuring The Effect Of Capital Structure And Seasonality On Expected Returns And Risk: The Fresh Market Vegetable Case

Published online by Cambridge University Press:  09 September 2016

J. W. Prevatt ,
L. L. Bauer ,
E. H. Kaiser  and
P. J. Rathwell
J. W. Prevatt
Affiliation:
Department of Agricultural Economics and Rural Sociology, Auburn University
L. L. Bauer
Affiliation:
Department of Agricultural Economics and Rural Sociology, Clemson University
E. H. Kaiser
Affiliation:
Department of Agricultural Economics and Rural Sociology, Clemson University
P. J. Rathwell
Affiliation:
Department of Agricultural Economics and Rural Sociology, Clemson University
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Abstract

The effect of capital structure and seasonality of fresh market vegetables was examined via the Target MOTAD model. The level of capital indebtedness and the selection of either a fall or spring season resulted in significantly different levels of enterprise mixes, expected returns, risk magnitudes, rates of change of risk magnitudes, and operating capital requirements. The fall season demonstrated larger initial levels of risk and larger increases in the level of risk due to increases in indebtedness. The spring season showed larger increases in risk between the minimum risk point and the maximum expected return point (linear programming solution) on the risk-efficient frontier. Operating capital requirements were substantially higher for the fall season than for the spring season. The operating capital requirements of the spring season were significantly affected by the level of indebtedness and the magnitude of risk selected by the grower, while the larger operating capital requirements of the fall season were only marginally affected.

Keywords

alternative enterprisesdecision-makingdebtoperating capitalseasonTarget MOTAD
Type
Articles
Information
Journal of Agricultural and Applied Economics , Volume 24 , Issue 1 , July 1992 , pp. 171 - 178
Copyright
Copyright © Southern Agricultural Economics Association 1992

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