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Earning a Positive Net Income is Not Good Enough

May 2005

From Seed World Magazine - Sure, your accountant asserts that you have earned a profit, but you could still be losing money! For example in Table 1, a privately-held seed company had revenues last year of $2.5 million on $2.4 millionin expenses, giving it an accounting profit of $100,000. However, the owner has $1.5 million of equity invested and could earn 10 percent in other investment opportunities. Thus, the equity could have generated a return of $150,000. The economic profit associated with the firm is actually the Generally Accepted Accounting Procedures (GAAP) profit minus the value of the opportunity given up, which is negative $50,000. By choosing to invest in the seed company instead of the other investment opportunities, $50,000 of value was destroyed.


Josh Detre
Michael Gunderson
Brian Briggeman
Michael Boehlje


Seed World

What to Expect from Government Payments for the 2003 Crop

October and November is a bustling time for producers in Indiana as harvest continues across the state. But, this time of year also marks a busy period for the local FSA office as government payments begin to come into focus for many producers. With the low corn prices there should...

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