An Analysis of Investment Decisions in Agribusiness

Abstract

Investment decisions are meant to bring more efficiency in business being a complex problem in agriculture, both for farmers and for investors and banks. The complexity of this process is also determined by several factors that influence investment decisions. Thus, in the decision taking process usually managers and investors consider the expenditure over a period, the cost of the necessary capital and the expected profitability. Based on the literature review we proposed a list of determinant factors for the investment decision, such as: the increasing incomes provided by the investment, the market size, possible constraints, personal characteristics and the farm specific factors. In the current paper we analyse the relationship between investment decisions, managerial accounting and financing needs of agricultural businesses and identifying the key parts that make managerial accounting important for the creditworthiness of the company.The example analysed in this article proves that costs are not only a base for calculating capital budgeting indicators, but they are also essential for cash flow calculation. Moreover, cash flow proves to be important for a bank's decision in financing a project when essential indicators like liquidity rate are not adequate in the analysed case.