Suffering from low profitability
What is the most likely thing that an agricultural producer who is suffering from low profitability (low return on investment over an extended time period) can do to improve profitability? (hint, all other questions (1-4) have quite a bit of room for opinion, or individual circumstances, the question 5 answer is based on fact, so I am looking for specific answers based on the class discussion from when we went over the KFMA data).
Sample Solution
A criterion that farmers will likely suffer in deciding whether to adopt an alternative is whether it increases the farm`s profits. One method to estimate an alternative`s impact on profit is to develop a pro forma income statement for the business as it would be operated if the alternative is adopted. The profit estimated on this statement could then be compared to a pro forma income statement developed for the current business. Generally, it is assumed that the owners will pursue the option that is projected to generate the most profit. However, farm owners occasionally may adopt an alternative even though it may negatively impact profit. Reason for such a strategy might include the alternative provides the owner satisfaction other than the income it generates; or incurring a loss at this time leads to an opportunity to earn greater profits in the future.
