Key indicators for business planning and evaluating the efficiency of agricultural projects

Key indicators of agricultural production planning

A business plan is developed based on technical and economic indicators, norms and standards, scientific and production recommendations, key indicators of the farm's development level, contractual obligations, etc.

An indicator is a qualitatively defined variable that can correspond to a multitude of quantitative values. Indicators are divided into the following groups:

• quantitative — reflect volumes of gross output, marketable products, number of employees, etc., in units (tons, rubles, man-hours, etc.);
• qualitative — relative values expressing the ratio between quantitative indicators (labor productivity, crop yield, livestock productivity). Qualitative indicators have quantitative definiteness, while quantitative indicators have a qualitative characteristic;
• natural — characterize the material-object content of the enterprise plan and are measured in units of each type of good, product, or raw material (pieces, meters, kilograms, etc.);
• monetary — determine the total amount of created products or sold goods in monetary terms.

In the process of calculating technical and economic indicators, norms and standards are taken into account.

A norm is a measure of labor expenditure and consumption of raw materials or supplies in absolute terms for the production of a unit of output (work, services) under relevant conditions (service norm, headcount norm, quality norms, natural loss norm, etc.).

A standard is a relative indicator of the degree of use of means of production under modern equipment and technology, labor organization, and high staff qualifications (raw material stocks, volume of work-in-progress, standards for the use of implements). Standards are obtained analytically or by calculation (per 1 hectare of crop, one livestock animal, etc.).

Evaluation of the efficiency of agricultural investment projects

A properly prepared business plan shows the prospect of an organization's development, i.e., ultimately answers the most important question for an entrepreneur and an investor: is it worth investing money in the project and will it generate income that will cover all expenses of effort and resources? To this end, the following indicators are determined: net present value, return on investment, and payback period.

Net present value (NPV, other names: integral effect, the most important indicator of project efficiency, defined as the accumulated discounted effect over the calculation period (discounting is the reduction of future income to the present time). NPV is calculated as the excess of total cash inflows over total costs for a given project, respectively, without and with taking into account the inequality of effects (as well as costs and results) related to different moments in time.

To recognize a project as efficient from the investor's point of view, it is necessary for the project's NPV to be positive. When comparing alternative projects, preference should be given to the project with a higher NPV value (provided that NPV > 0).

Return on investment is defined as the ratio of the sum of discounted income from the project over the entire duration of its implementation to the sum of discounted investment costs. This ratio shows the amount of receipts per one monetary unit of investment costs. This indicator should be distinguished from the production profitability ratio, which means the ratio of profit obtained from production to current costs.

The payback period (recovery term) is one of the most frequently used indicators, understood as the period required to recover the initial capital investment from the project's profit. This indicator is convenient to use if the profit per unit of time (month, quarter, year) is constant. Otherwise (as a rule, in practice, income from operational activities is not the same from period to period), the average profit value or the payback period is determined, which is calculated by directly counting the number of years during which the sum of income received will exceed the initial capital investment. However, this indicator does not take into account the duration of income generation (the longer the duration of income generation, ceteris paribus, the higher the efficiency of the project). Investment efficiency assessment based on the payback period calculation is advisable in projects where liquidity is important rather than project profitability (the main thing is for investments to pay off as quickly as possible), when investments are associated with a high degree of risk (the shorter the payback period, the less risky the project).

What is planning? 2. On what principles is planning in agriculture based? 3. What are the main planning methods used in agriculture? 4. Give a definition of a plan. 5. In what sequence are plans developed at the enterprise level? 6. What levels of planning and types of plans are distinguished in agriculture? 7. What is a business plan?

For what purpose is a business plan compiled? 9. What sections does an investment project business plan include? 10. What sections does an enterprise business plan include? 11. What indicators does the production program reflect? 12. What serves as a source of information when planning production activities? 13. What main forms does the crop production development program and the livestock production development program include? 14. What parameters are determined in the production program of an enterprise? 15. What parameters does the production program of industrial units of an agricultural enterprise include? 16. What indicators are used in planning? 17. Give a definition of the concepts "norm" and "standard". 18. What indicators characterize the efficiency of a business plan?