WOW !! MUCH LOVE ! SO WORLD PEACE !
Fond bitcoin pour l'amélioration du site: 1memzGeKS7CB3ECNkzSn2qHwxU6NZoJ8o
  Dogecoin (tips/pourboires): DCLoo9Dd4qECqpMLurdgGnaoqbftj16Nvp


Home | Publier un mémoire | Une page au hasard

 > 

Using the WACC methodology to improve the assessment of projects in the french farming industry. Empirical evidences from farm's results of Isère

( Télécharger le fichier original )
par Anaël BIBARD
Grenoble Graduate School of Business - MBA 2012
  

précédent sommaire suivant

Bitcoin is a swarm of cyber hornets serving the goddess of wisdom, feeding on the fire of truth, exponentially growing ever smarter, faster, and stronger behind a wall of encrypted energy

3.2.2 Data Processing

The raw data extracted from the database were to be analyzed. First, the self-employed labor unit costs are not always taken into accounts into the books, due to accounting regulations. Therefore, the data have been transformed to include a labor cost for each labor unit at the SMIC (minimum salary level in France for a FTE, Table 8):

Years

2006

2007

2008

2009

2010

SMIC before social tax per month

1 254.28€

1 280.07€

1 308.88€

1 337.70€

1 343.77€

Table 8: Cost of each labor unit per month for the SMIC

Another element had to be transformed in order to have reliable results: social security contributions. This cost is tax deductible, but depending on the legal form of the company it can be treated outside of the balance sheet and profit & loss statements. The calculation of these contributions depends on many factors, such as the year of installation of the farmer, his average profits for the last 3 years (an option exists to calculate it only with last year results). An important element is that only farmers who operate in limited liability legal form have the possibility to treat these contributions off-balance sheet. Their results are most of the time significantly higher, justifying that the added contributions should be on average higher than the contributions in books. The contributions were calculated based on the results of the annual accounting results (in reality, the years' results are taxed over 3 years: N-1, N-2 and N-3 for most farms). This recalculation introduced a bias in this research, but the accounting principles of the company have been adapted to avoid this bias for future researches. For 2012 and after, all social contributions will be recorded in the database.

Years

# of companies without

social security contribution in books

Average contribution added

 

Average contribution in
books

Average

contribution for the population

2006

77

(12%)

7

061

7

193 €

7

176 €

2007

110

(18%)

11

871

7

009 €

7

871 €

2008

139

(22%)

12

633

7

371 €

8

551 €

2009

153

(25%)

10

124

8

230€

8

697 €

2010

162

(26%)

6

539

7

488 €

7

241 €

Table 9: Social security contributions

3.2.3 Research Questions

The main goal of this analysis is to test the traditionalist approach which states that an optimal level of debt helps to reduce the WACC (Brealey, Myers, & Allen, 2008, p. 485). If this theory holds in agriculture, a positive link between the debt level and profitability or productivity should be observed. Therefore, the research question can be stated with two hypotheses.

The dependant variables tested are:

- ROA: return on asset.

- ROE: return on equity.

The Independent variables tested is:

- Level of debt of the company.

First hypothesis:

H0: ROA and ROE tend to increase with the level of debt of the farms in Isère.

H1: ROA and ROE have no positive links with the level of debt of the farms in Isère

Second hypothesis:

H0: Financial distress may occur when leverage increases, reducing ROA or ROE. H1: No signs of financial distress are clearly observed when the leverage increases.

The second hypothesis is common sense. However it has to be tested for agriculture. Milk production was really stable for years, because the market was controlled thanks to the system of quotas. Therefore, as the volume of production is somehow easy to control, financial performances of the farms are easy to predict, limiting strongly the risks of financial distress.

précédent sommaire suivant






Bitcoin is a swarm of cyber hornets serving the goddess of wisdom, feeding on the fire of truth, exponentially growing ever smarter, faster, and stronger behind a wall of encrypted energy








"Et il n'est rien de plus beau que l'instant qui précède le voyage, l'instant ou l'horizon de demain vient nous rendre visite et nous dire ses promesses"   Milan Kundera