h when he dies. Neither does the man who works for a
salary or practices some profession for fees know what his annual
income will be even during the following decade. Neither one nor the
other knows whether he will die a millionaire or a pauper. It is a
problem too complex for any human mind to analyze. It is less certain
than what the weather will be on this day next year, because it is the
resultant of more variable factors.
In some respects there is more hazard in farming than in manufacturing
or in merchandising, while in other respects there is much less. The
profit which may be obtained from farming is neither easier nor more
difficult to estimate than is that of other commercial enterprises.
However, there is no business in which more foolish estimates are made
as to the probable profits, except, perhaps, in mining.
The purpose of this chapter is not to give advice as to possible or
probable profits, but rather to point out the general character of the
data required for any individual problem, where the data may be
obtained and how it may be applied.
There are two forms or methods of stating the financial gain that has
been obtained from farming or other business ventures during a year or
other specific period. The first may be called the interest on the
investment method, and the second the labor income method.
With the interest on the investment method, all expenses may be
subtracted from all the sales. From the cash balance thus obtained the
increase or decrease in inventory may be added or subtracted. This
balance may then be divided by the capital invested, to determine the
rate of interest received.
The rate of interest method is the usual method in the commercial
world. The prosperity of the railroad or industrial concern is judged
by the rate of interest it pays its stockholders on the par value of
the stock. The stock itself takes on the capitalization in accordance
with the present and prospective dividends. The fact that this method
is generally used in the commercial world is evidence that it is well
suited to its needs.
The young farmer who wishes to know whether the operation of a given
tract of land in a certain manner offers him a worthy opportunity will
not find the interest on the investment method the best suited for his
purpose. This is especially true when applied to a single product. For
example, it may be shown that 50 hens will, when properly managed, in
connection with other
|