How climate change may affect his farm’s accounting numbers, both income statement and balance sheet.

Answer:

             Climate change can bring huge changes in the financial outcomes and business operations of an organization working in the manufacturing, service, or retailing sector. However, in this case, the selected organization is involved in the farming operations which is more sensitive to the changes occurred in the climate. For instance, an increase in the warmness of climate because of factories and carbon emission in the society will bring negative changes in the production systems of farms with livestock and crops (Fuhrer & Gregory, 2014). In case of such climate, farm face changes in the production level and overall demand for the produced products. Increase in the production and sales of the produced products will cause to increase net revenue and profit amounts in the income statement. However, negatively occurred changes in the sales volume and production scale will cause to generate a negative impact on the net profit and revenue values in the income statement. However, if a farmer takes the loan on interest to execute business operations because of negative and unfavourable climate changes for his farming then cost of operations (CGS) may reduce EBITDA and Operating income for the fiscal year. However, changes in the balance sheet will mainly occur in the capital and assets sides. Cash and inventory level will increase or decrease depending upon the impact of climate change. However, the capital side (shareholder’s capital or investment) will increase if climate changes go in the favour of farming business as more investors will invest their money in this business.