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"Jim Webster" wrote in message
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Hamish Macbeth wrote in message
So that is why I chose return on capital. Most businesses do
function on invested capital.


But what figure do you use as capital when you own the farm?

To give a non-farming analogy. Lord Bath owns the Longleat Estate and runs a
bussiness from it.
Do you treat the value of the estate as the captitol and consider the
turnover and profits in relationship to that?

Or do you think his family already owned it as a private property and
utilise it to earn cash. A bit like someone owning a family car and earning
a little extra money weekends doing private car hire.

If you count the value of the estate as the capitol then you will probably
deduce he could do better putting the money in the building society and that
he is running the bussiness on poor returns.
If you treat it as a mechanism by which he enjoys the continued ownership of
a vast estate that otherwise would be lost to his heirs in taxes and the
capitol is only the extras spent purely to run the business, then the return
on capitol can look very good.

Your farm may be worth a million pounds as bare land and fixed buildings but
you could count this as something you own and you run a business to
maintain your possesion. in which case only the non-fixtures count as
business capitol.

A farm is somewhat different to most businesses, say a hairdressers or
retail shop where the bussiness premisses are normally not part of the
owners private and personal life. There is not the seperation between what
is enjoyed as a personal posestion and life enhancement and what is the
source of income.

I know that the whole thiing may have been bought under a business loan but
there is still the duality with a farm that does not exist in most business
activities.