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An Examination Of Cash Flow And Conventional Net Income Measures For Evaluating The Economic Viability Of Farms Of Varying Size

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  • Holland, David W.
  • Young, Douglas L.

Abstract

This study examines the question of income adequacy as it relates to the broader issue of an economically viable farm size in the Columbia Basin of Washington State. The issue is especially relevant because of possible limitations on farm size resulting from enforcement of the 1902 Reclamation Act. Income estimates derived under two alternative accounting frameworks - the standard economic accounting method and the after-tax cash flow accounting method - were examined. Findings were that the after tax cash flow accounting framework was more appropriate for examining the income adequacy aspect of the viability issue as it incorporated the effect of federal income taxes and farmer's equity, both of which are important determinates of income levels. Using the after-tax cash flow accounting framework, the after-tax cash flow for a representative 320 acre farm was found to range between $16,858 and $42,670 depending upon the profitability of the selected crop rotation.

Suggested Citation

  • Holland, David W. & Young, Douglas L., 1980. "An Examination Of Cash Flow And Conventional Net Income Measures For Evaluating The Economic Viability Of Farms Of Varying Size," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 5(1), pages 1-12, July.
    • Handle: RePEc:ags:wjagec:32524
    DOI: 10.22004/ag.econ.32524
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    Cited by:

    1. Davis, Neal & Hanson, Gregory D. & Kinnucan, Henry, 1986. "Taxation And Agriculture: An Annotated Bibliography Of Selected Journals," Staff Reports 277841, United States Department of Agriculture, Economic Research Service.

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    Keywords

    Agricultural Finance;

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