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Article
Publication date: 8 May 2009

Ashok K. Mishra, Charles B. Moss and Kenneth W. Erickson

The purpose of this paper is to use the DuPont expansion to examine those factors underlying differences in (rates of) return on different crop portfolios over space (ten…

Abstract

Purpose

The purpose of this paper is to use the DuPont expansion to examine those factors underlying differences in (rates of) return on different crop portfolios over space (ten regions) and time (1960‐2004). The paper also estimates the impact of government payments on farmland values through its impact on farm profitability.

Design/methodology/approach

Businesses use the DuPont model to analyze the profitability of a business. This model includes three components: net profit margin, asset turnover, and financial leverage (or assets to equity). It is based on the relationships among these three components and is expressed as a product of ratios. For the purposes of the current study, accrued capital gains from (total) returns are excluded to focus on cash returns “cash flow”. Returns from current income are a “cash flow” available in the short run to pay financial obligations. Furthermore, returns from capital gains are not liquid; they are gains in wealth fully captured as capital gains/losses only in the longer term. Following the DuPont approach, the effect of government payments on farm asset values is equal to the sum of the effect of government payments on profit margins plus the effect of government payments on the asset turnover ratio.

Findings

The analysis focuses on agricultural profitability in the ten Economic Research Service (ERS) regions. By comparing the components of the DuPont expansion, profitability differences over time are analyzed. The results indicate that one cause of low profitability in the Corn Belt and Mountain regions is a perpetually low profit margin while the evidence for other regions supports lower asset efficiency. Results show that government payments impact the profit margin and affect value of farm assets in particular farmland values but not asset turnover ratio.

Originality/value

The use of DuPont expansion factor in agriculture is original and really helps us to understand the factors driving profitability in agriculture. Another innovation (originality) in this paper is the theoretical model that connects the DuPont expansion factor, government payments and its impact on farmland values.

Details

Agricultural Finance Review, vol. 69 no. 1
Type: Research Article
ISSN: 0002-1466

Keywords

Article
Publication date: 26 August 2014

Richard Nehring, Jeffery Gillespie, Charles Hallahan, James Michael Harris and Ken Erickson

– The purpose of this paper is to determine the drivers of economic financial success of US cow-calf operations.

Abstract

Purpose

The purpose of this paper is to determine the drivers of economic financial success of US cow-calf operations.

Design/methodology/approach

This research uses a system of equations (DuPont analysis) in conjunction with 2008 farm-level data from the US Department of Agriculture's Agricultural Resource Management Survey to evaluate the factors driving cow-calf profitability, namely net profit margins, asset turnover ratio, and asset-to-equity ratio.

Findings

The study finds that the main drivers of return on equity are region, number of harvested acres on the farm, diversification of the farm, operator off-farm work, spousal off-farm work, and adoption of technologies. Of these factors, those for which producers can make short-term adjustments include off-farm work decisions and adoption of technologies. Longer-term adjustments can be made for farm diversification.

Originality/value

To the authors’ knowledge, no existing research has used farm-level data across US production regions to examine the factors affecting returns to equity of US cow-calf operations. These research results may be used to identify strategies producers can use to improve their farm's economic viability, areas where extension services can assist farmers in making better financial decisions and economic factors that are likely to lead to structural changes in the beef industry.

Details

Agricultural Finance Review, vol. 74 no. 3
Type: Research Article
ISSN: 0002-1466

Keywords

Article
Publication date: 20 January 2021

Fedra Vanhuyse, Alison Bailey and Richard Tranter

Farm businesses in England are under pressure to intensify production sustainably while managing costs and meeting market demands. Commodity prices and support from Common…

Abstract

Purpose

Farm businesses in England are under pressure to intensify production sustainably while managing costs and meeting market demands. Commodity prices and support from Common Agricultural Policy (CAP) payments are important determinants of profitability. With the United Kingdom (UK) leaving the European Union (EU), revised policy will see farming more exposed to fluctuating commodity prices and financial support from Government more focused on encouraging environmental land management. The research reported here, investigated whether business management practices of farmers influences financial performance, and how policy could be tailored to better meet the needs of farm businesses.

Design/methodology/approach

Regression models were estimated for 862 Cereals, Dairy and Livestock farms in England using official data for 2011–2012, in order to assess whether different farm characteristics, business management practices (identified from a systematic review of 102 studies), knowledge acquisition indicators and manager experience had an effect on four different financial performance ratios. The financial performance of the top 25% of the sample was also compared to the bottom 25% in terms of use of business management practices.

Findings

The results show that business planning and benchmarking had a positive, statistically significant, effect on financial performance, as do business size and knowledge acquisition, albeit to a lesser extent.

Originality/value

The research reported here is the most extensive examination, to date, of the impact of management practices on the financial performance of farms. Thus, it sends strong policy recommendations.

Details

Agricultural Finance Review, vol. 81 no. 3
Type: Research Article
ISSN: 0002-1466

Keywords

Article
Publication date: 1 November 2006

Peter Cseres and Neil Kelly

In 2004, DuPont began to adjust the way it generated new talent. Search and selection specialist, NDK International, was tasked with playing a pivotal role in redesigning…

1484

Abstract

In 2004, DuPont began to adjust the way it generated new talent. Search and selection specialist, NDK International, was tasked with playing a pivotal role in redesigning DuPont’s employee search system and identifying the right employees for DuPont’s EMEA territories. By providing clearer lines of communication and promoting brand awareness, DuPont has significantly improved its talent management system.

Details

Strategic HR Review, vol. 6 no. 1
Type: Research Article
ISSN: 1475-4398

Keywords

Article
Publication date: 5 February 2018

Samuel Jebaraj Benjamin, Zulkifflee Bin Mohamed and M. Srikamaladevi Marathamuthu

The purpose of this paper is to investigate the informativeness of asset turnover (ATO) and profit margin (PM) of the DuPont analysis in explaining dividend policy.

1688

Abstract

Purpose

The purpose of this paper is to investigate the informativeness of asset turnover (ATO) and profit margin (PM) of the DuPont analysis in explaining dividend policy.

Design/methodology/approach

Annual financial data from Compustat for the period 2004-2009 were used to analyze a sample of Malaysian firms.

Findings

This study finds both PM and ATO to strongly explain contemporaneous dividends. The decomposition of return on net operating assets (RNOA) into PM and ATO also improves the explanatory power of dividends. The results of the predictive model show that PM and ATO are useful in predicting the propensity of firms to pay dividends. The results of the change dividend model, however, do not provide any significant results for PM and ATO.

Practical implications

Understanding the influence of ATO and PM on dividends could enable managers to realize the importance of these factors when making dividend policy decisions. Other market participants, such as financial analysts and lenders, could also recognize the empirical specifics related to decomposing the profitability measure into its two components, one measuring the asset efficiency and the other measuring the profitability per unit of product, in the context of dividend policy.

Originality/value

This study extends the empirical specifics of prior dividend policy studies by decomposing the popular profitability measure of return on assets into its two components of PM and ATO.

Details

Pacific Accounting Review, vol. 30 no. 1
Type: Research Article
ISSN: 0114-0582

Keywords

Case study
Publication date: 15 December 2021

M.B. Raghupathy

The primary teaching objective is to discuss the capital raising efforts of a firm under financial distress. It also provides supporting data to calculate cost of capital…

Abstract

Learning outcomes

The primary teaching objective is to discuss the capital raising efforts of a firm under financial distress. It also provides supporting data to calculate cost of capital, DuPont/modified DuPont values and Altman’s Z-Score that can appropriately be incorporated into the discussion. Case-B provides information and data of the company’s recent performance and to changes in bankruptcy law in India. Overall, this case study provides ample scope to discuss, understand and provide the solution to the following key corporate finance themes as follows: 1. Analyzing accounting statements and examine potential earnings quality issue. 2. Predicting default and bankruptcy using qualitative analysis, financial ratios, traditional and modified DuPont models and Altman’s Z score model. 3. Examining the capital raising efforts of a distressed firm, which has already defaulted on borrowings. 4. To explore the impact of changes in regulation on the turnaround efforts of the firm as well as on the promoters of the firm.

Case overview/synopsis

Since 2005, Amtek Auto moved at a breathtaking speed with the goal of reaching $10bn in sales, from the current level of about $1.2bn. The group had acquired more than a dozen companies spending about Rs.5,000cr. ($850m) during this period primarily through borrowed funds. However, the market and business expansion was not happening as expected. The company’s capacity utilization was just about 40% (approx.) during much of this period. The mounting fixed costs of operation and debt servicing grew to the level of unsustainability, led the firm to default on its borrowing. Now the company had to quickly recapitalize itself to run its operations and retain the premier position in auto component industry. The company and its promoters were considering various methods of debt restructuring, asset sale and further equity infusion.

Complexity academic level

Introductory and elective level corporate finance.

Supplementary materials

Teaching notes are available for educators only.

Subject code

CSS 1: Accounting and Finance.

Details

Emerald Emerging Markets Case Studies, vol. 11 no. 4
Type: Case Study
ISSN: 2045-0621

Keywords

Article
Publication date: 1 December 2001

Subhotosh Khan and Dan J. Molligan

Personal electronic devices at the user interface, like cell phones, utilize BGA/CSP structure for miniaturization of circuits. These structures are subjected to severe…

Abstract

Personal electronic devices at the user interface, like cell phones, utilize BGA/CSP structure for miniaturization of circuits. These structures are subjected to severe thermal loads due to environment of use. Starting with a microstructure of a failed board due to thermal cycles, the stresses/strains in this structure were analyzed from –408C to 1258C. In the finite element models (ABAQUS), we represented the structure as a composite of three‐dimensional (3‐D) elastic materials. The model showed stress/strain/energy concentrations at the actual failure points. The model also provided a route to improved durability by reducing these failure potentials, through change in the substrate of the printed circuit board (PCB). We observed significant reduction in failure potential when resin coated copper was replaced by THERMOUNT1 in PCB. This improved performance can be directly related to better‐matched modulus and coefficient of thermal expansion (CTE) of the PCB substrate to the chip (silicon). A more sophisticated model is under construction, where the time dependent material properties and non‐linear effects such as solder creep will be included.

Details

Circuit World, vol. 27 no. 4
Type: Research Article
ISSN: 0305-6120

Keywords

Book part
Publication date: 7 October 2010

Florence P. Bogacia and Emilyn Cabanda

This chapter investigates the financial performance and technical efficiency of the 26 listed firms in the services sector of the Philippine Stock Exchange over the period…

Abstract

This chapter investigates the financial performance and technical efficiency of the 26 listed firms in the services sector of the Philippine Stock Exchange over the period 1998–2007, using the DuPont system and the super-efficiency data envelopment analysis (SE-DEA). Empirical findings revealed a negative return on equity for the sector and the presence of outliers in the sample. We also verified a robust significant association between the financial and technical performances of the sector.

The chapter offers new significant contributions to knowledge in terms of the multidimensional performance evaluation and the efficiency of the stock market, especially in developing economies, which has not been a well-researched area. Managerial implications are also identified for the improvement of the firms’ management and the usefulness of the SE-DEA model in performance management.

Details

Applications in Multicriteria Decision Making, Data Envelopment Analysis, and Finance
Type: Book
ISBN: 978-0-85724-470-3

Keywords

Case study
Publication date: 20 January 2017

Susan Chaplinsky, Felicia C. Marston and Brett Merker

In January 2012, Ellen Kullman, CEO and chairman of DuPont, must decide whether to retain or sell the company's Performance Coatings (DPC) division. This is an…

Abstract

In January 2012, Ellen Kullman, CEO and chairman of DuPont, must decide whether to retain or sell the company's Performance Coatings (DPC) division. This is an introductory case on valuing a leveraged buyout. The case focuses on a publicly listed corporation's decision to divest a large division and asks students to compare the division's value if it remains under DuPont's control or is sold to an outside party. The transaction size of approximately $4 billion is too large for potential strategic buyers in the industry, making private equity (PE) firms the most likely bidders. The case provides a base-case adjusted present value (APV) model of DPC as a stand-alone company and gives students specific assignments to adjust it to reflect the division's potential value under PE ownership (e.g., EBITDA growth, multiple arbitrage, and increased leverage).

The case is designed to illustrate and discuss the differences between a public company's valuation based on unlevered free cash flows and a PE sponsor's valuation based on residual (levered) cash flows.

This case has been successfully taught in a second-year elective course covering entrepreneurial finance and private equity and in an advanced undergraduate course on corporate finance. It is appropriate for use in classes on private equity, advanced corporate finance, or deal valuation.

Details

Darden Business Publishing Cases, vol. no.
Type: Case Study
ISSN: 2474-7890
Published by: University of Virginia Darden School Foundation

Keywords

Article
Publication date: 31 July 2009

Cesar L. Escalante, Calum G. Turvey and Peter J. Barry

The purpose of this paper is to introduce the application of sustainable growth challenge (SGC) model in agricultural finance as a conceptual paradigm and then uses the…

1005

Abstract

Purpose

The purpose of this paper is to introduce the application of sustainable growth challenge (SGC) model in agricultural finance as a conceptual paradigm and then uses the model to measure sustainable growth rates for Illinois grain and livestock farmers. The SGC concept is used to understand the economic conditions and business decisions made by farmers in certain episodes of the time period analyzed.

Design/methodology/approach

A seemingly unrelated regression approach is used to analyze the interrelationships of the four levers of growth using a panel data of Illinois farm‐level financial and operating information. The second analysis flows from the first and examines aggregate US farm data to provide an historical perspective of changes in the SGC over time.

Findings

Econometric results indicate the relevance of the SGC model in explaining farm financial and operating decisions. The farms’ tendencies to attain balanced growth seem to be more influenced by asset productivity and leverage decisions, which are given different emphasis by grain and livestock farms due to differing operational structures and constraints. This study's estimation and analysis of the USA farm sector's actual and sustainable growth rates from 1981 to 2001 data generally show that the industry has adapted to positive or negative SGCs in a manner consistent with the model.

Originality/value

This paper explores the relevance of the SGC model as a business, policy and teaching tool for understanding issues surrounding farmers’ financial and operating decisions.

Details

Agricultural Finance Review, vol. 69 no. 2
Type: Research Article
ISSN: 0002-1466

Keywords

1 – 10 of 443