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Core: Farm Product Study and Farm Finance
Quick questions on Gross margins and farm finance explained: HSC Agriculture Farm Product Study
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What are the limits of gross margins?Show answer
A gross margin is not profit. It ignores fixed costs, so an enterprise with a positive gross margin can still leave the whole farm unprofitable once overheads are paid. It is a single-season, single-enterprise snapshot and does not capture rotational benefits (a legume crop lifting the following cereal), risk, cash flow timing, or sustainability. It also assumes the price and yield used, which are uncertain.
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