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Econ Module 6 Flashcards

1
Q
  • Science which deals with the proper combination and operation of production factors, including land, labor, and capital, and the choice of crop and livestock enterprises to bring about a maximum and continuous return to the most elementary operating units in farming.
A

Farm Management

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2
Q

The artistic aspect includes keeping a tidy farm layout and maintaining good contact with various sources of farm inputs so that they could be arranged in adequate quantity at the proper time.

A

Farm Management as an art

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3
Q

It relates to the decision-making about specific operations on the farm and includes applying scientific principles and methodology.

A

Farm Management as a science

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4
Q

It indicates the consideration of economic efficiency so that the farmers’ goal is achieved with minimum cost and maximum returns.

A

Farm Management as a business

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5
Q

3 Major Components in the Farm Business

A
  1. Physical and biological
  2. Farmer and his family
  3. Exogenous/Institutional Component
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6
Q

soil, land quality, topography, climate, water availability, location

A

Physical and biological

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7
Q

family size, labor force demand, management skills, education, farm size, farmer’s attitude and goals

A

Farmer and his family

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8
Q
  • policies
  • infrastructure and technical assistance
  • Socio-economics
A

Exogenous/Institutional Component

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9
Q

Other disciplines related to Farm Management

A
  1. Biological Science
  2. Physical Sciences
  3. Social Sciences
  4. Agribusiness
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10
Q

Study the amount of product related to the different crop varieties or animal breeds, levels and kind of fertilizer and feed ration, care of plants and animals, and other cultural and management practices.

A

Biological Sciences

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11
Q

Study the performance and nature of different construction materials, types of constructions, buildings, machinery, and equipment, and characteristics of soils, water, and other physical elements related to agriculture.

A

Physical Sciences

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12
Q
  • Study the behavior of people in relation to different situations.
  • Needed in dealing with farm suppliers, farm laborers, and buyers of farm products
A

Social Sciences

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13
Q

The sum total of all operations involved in the manufacture and distribution of farm supplies; production activities of the farmer and the storage, processing and distribution of farm commodities and items made from them.

A

Agribusiness

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14
Q

Functions of Management

A
  • Planning
  • Implementation
  • Control
  • Adjustment
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15
Q

Choosing a course of action.

A

Planning

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16
Q

True or False

To plan, a manager must establish goals, identify resources, and allocate the resources to competing uses.

A

True

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17
Q

Putting the plan into action

A

Implementation

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18
Q

Control is the ____ function.

A

feedback

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19
Q

It ensures that the plan is followed, and desired results are produced, and provides an early warning to make adjustments if needed.

A

Control

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20
Q

True or False

Adjustment is done if outcomes are not meeting the manager’s objectives.

A

True

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21
Q

May involve fine-tuning the technology used, or it may require changing enterprises.

A

Adjustment

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22
Q

Consists of charting the overall long-term course of the business

A

Strategic management

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23
Q

Consists of taking short-run actions that keep the business moving along that course until the destination is reached

A

Tactical management

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24
Q

True or False

Surveying the business environment is also known as internal scanning

A

False

It is known as external scanning

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25
Q

Steps in Strategic Management

A
  1. Define the mission of the business
  2. Formulate the goals for the farm and family
  3. Assess the resources available to the business (internal scanning)
  4. Survey the business environment (external scanning)
  5. Identify and select strategies that will reach goals
  6. Implement and refine the selected strategies
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26
Q
  • Short description of why a business exists
  • May include strictly business consideration
A

Mission

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27
Q

True or False

For family-owned and operated farms, the farm’s mission maybe only one component of the overall family mission.

A

True

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28
Q

Goals should be/have?

A
  • written
  • specific
  • measurable
  • timetable
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29
Q

True or False

Assessing resources is called “resources scanning”

A

False

It is called internal scanning

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30
Q

What are the types of resources?

A
  1. Physical resources
  2. Human resources
  3. Financial resources
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31
Q

Skills of the operator and other employees, likes and dislikes of individuals

A

Human resources

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32
Q

Cash, other capital and available credit

A

Financial resources

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33
Q

Land, buildings, fences, breeding livestock, machinery and equipment, established perennial crops are examples of?

A

Physical resources

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34
Q

A change may provide an ____ or a ____ and the manager must be able to react to them early.

A

opportunity ; threat

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35
Q

True or False

As the number of alternative uses for resources increases, so does the complexity of the manager’s decisions.

A

True

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36
Q

Some businesses have more potential routes for reaching their goals than others because resources are more ____

A

flexible

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37
Q

Strategic management is an ____

A

ongoing activity

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38
Q

As the number of alternative uses for resources increases, so does the complexity of the manager’s decisions.

A

Identifying and Selecting Strategies

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39
Q
  • Manager must formulate action steps to implement the plan
  • Manager must decide which information to collect to evaluate the success or failure of the plan
A

Implementing and Refining

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40
Q

Doing the right things in
farming

A

Strategic management

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41
Q

Doing things right in farming.

A

Tactical management

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42
Q

Characteristics of Decisions

A
  • Importance
  • Frequency
  • Imminence
  • Revocability
  • Number of alternatives
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43
Q

The Decision-Making Environment in Agriculture

A
  • Biological processes and weather
  • Fixed supply of land
  • Small size
  • Perfect competition
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44
Q

Producers are price takers, both for resources bought and products sold

A

Perfect competition

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45
Q

Laws of nature place limits on manager’s decisions

A

Biological processes and weather

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46
Q

Land base is essentially fixed, making decisions about land use, sale, or acquisition critical

A

Fixed supply of land

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47
Q

Good management means the difference
between ____ or ____

A

earning a profit ; suffering a loss

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48
Q

The overall direction of the farm business is defined through?

A

strategic plan

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49
Q

True or False

Farm managers operate in an environment that differs from that of most other businesses because of certain characteristics of a typical farm.

A

True

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50
Q

Written statements or collection of facts and figures on a subject for a definite purpose

A

Farm records

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51
Q

____ are distinguishing features of accounts

A

money values

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52
Q

Written financial statement which are integral parts of a well-organized farm record

A

Farm accounts

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53
Q

Types of farm records and accounts based on form

A
  1. single entry form
  2. double entry form
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54
Q
  • Kept by most Filipino farmers
  • Each transaction is entered into only one account which supplies specific information regarding the business’ operations
A

Single entry form

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55
Q
  • Used in standard business accounting
  • Rules and procedures are well-established
A

Double entry form

56
Q

Types of farm records based on functionality

A
  1. Financial records
  2. Physical records
57
Q

Types of financial records

A
  1. farm income records
  2. farm expense records
58
Q

Types of physical records

A
  1. farm maps
  2. crop records
  3. livestock records
  4. other specialized records
59
Q
  • These are used to evaluate the financial performance of an individual enterprise or the whole farm.
  • Used for cash flow analysis.
  • Include the primary cash transactions like income and expenses of the farm business.
A

Financial records

60
Q
  • Tey complement the financial records and are essential to answer questions about technical relationships and resource allocation.
  • They show the quantities of inputs used and outputs obtained.
  • They also indicate the timing and methods of operation
A

Physical records

61
Q

Give a record of the location, size of the farm, soil types, land use, and possibly, past soil treatments

A

farm maps

62
Q

Show inputs used and output realized

A

crop records

63
Q

True or False

Livestock records include feeds records, production records, etc.

A

True

64
Q

machine logbooks, labor records, pest and disease control records, marketing records, rental records, etc.

A

other specialized records

65
Q
  • Often referred to as the property list
  • A detailed list of all properties with values assigned to them both at the beginning and end of the accounting period
A

farm inventory

66
Q

Common Methods of Asset
Valuation

A
  1. original cost or market value
  2. normal market value
  3. present market value
  4. net selling price
  5. imputed value
  6. original cost less depreciation
  7. replacement cost less depreciation
  8. income capitalization
67
Q
  • uses current or actual purchase price.
  • This method is most appropriate for items with short life span
A

original cost or market value

68
Q

used for purchased items that do not change value within a year

A

normal market value

69
Q

A good example of normal market value is ____

A

value of land

70
Q

applied for items consumed in the farm at the time the inventory is taken

A

present market value

71
Q

used for farm products sold or about to be sold or commodities primarily held for sale using net selling price computed as selling price minus marketing cost

A

net selling price

72
Q

used for items that do not have market values, but certain values are assigned to them to estimate their contributions to the enterprise

A

imputed value

73
Q
  • This method can be used for farm buildings, farm machinery, tools and equipment, and purchased breeding stocks.
  • Each year the item’s value is reduced by the amount of depreciation for that year.
A

original cost less depreciation

74
Q

This is used for properties whose values considerably change from year to year.

A

replacement cost less depreciation

75
Q

this is based on the theory that the purchase of a property is, in reality the purchase of future income

A

income capitalization

76
Q

what is the formula for income capitalization?

A

ICV = V0 + Rn/(1+i)^n

77
Q

decrease in value of durable properties or working assets due to normal wear & tear, aging and technical obsolescence, and effect of the elements

A

depreciation

78
Q

True or False

land can be depreciated

A

False

Land = not depreciated

79
Q

the number of years that you expect to use the asset in your business

A

Useful Life (Life Span) –

80
Q

all costs paid for the asset, including price, taxes, delivery and installation fees, expenses to get the asset into use

A

Cost (Acquisition Cost)

81
Q

expected market value of the asset at the end of the assigned useful life

A

Salvage Value (Scrap Value)

82
Q

the asset’s original cost less accumulated depreciation

A

Book Value

83
Q

the asset’s total depreciation over its useful life

A

Cost - Salvage Value

84
Q

3 methods of calculating
depreciation

A
  1. straight line method
  2. declining balance method
  3. sum-of-the-years digits method
85
Q

this is the simplest method to use and works well for items that are used continuously

A

Straight-line method

86
Q

Straight-line method formula

A

annual depreciation = acquisition cost - scrap value/life span

87
Q

is a way of chargingdepreciation that tends to conform to the decline in resale value

A

declining balance method

88
Q

declining balance method formula

A

annual depreciation = book value x depreciation rate

89
Q
  • This method avoids an undistributed balance at the end of the life span of the property.
  • If it is desired that depreciation expense must be distributed such that more value is charged during the early years of use than in later periods, then this method is recommended.
A

Sum-of-the-year’s-digits method

90
Q

Sum-of-the-year’s-digits method formula

A

annual depreciation = (acquisition cost - scrap value) x life span/sum of the year’s digits of the life span

91
Q

process of considering what crops to grow, in what quantity, and in what order, what building, labor, and power to be acquired

A

Farm Planning

92
Q

the process of estimating farm inputs or
expenses and allocating resources to different activities in the plan, and estimating outputs or production, and net returns.

A

Farm Budgeting

93
Q

True or False

Main purpose of farm budgeting is to compare the profitability of different kinds of enterprises.

A

True

94
Q

Types of farm planning and
budgeting

A
  1. Enterprise budgeting
  2. Whole-farm planning and budgeting
  3. Partial budgeting
  4. Cash flow budgeting
95
Q

presents estimates or projections of receipts (income), expenses (costs), and profits in the production of agricultural products

A

Enterprise budgeting

96
Q

a summary of the production to be carried out on the entire farm and the resources needed to do it.

A

Whole-farm Planning and Budgeting

97
Q
  • used to assess the economic viability of component technology.
  • used to test the profitability of some farm practices which may affect various parts of the farm business but does not call for a complete farm reorganization
A

Partial Budgeting

98
Q
  • a summary of a farm’s projected cash inflows and cash outflows associated with a particular farm plan, over a given period of time
  • Its purpose is to estimate the amount and timing of future borrowing needs and demonstrate the farm’s ability to repay debts in a timely fashion
A

Cash Flow Budgeting

99
Q

Types of Farm Business Analysis

A
  • Measures of Capital Position
  • Measures of Profitability
  • Measures of Efficiency
100
Q

Tool for Measuring Capital Position

A

Balance Sheet

101
Q

The Balance Sheet Equation

A

assets = liabilities + owner’s equity or net worth

102
Q

The Balance Sheet Ratio Formula

  1. Current ratio =
  2. Net worth ratio =
  3. Net capital ratio =
  4. debt-equity ratio =
A
  1. CA/CL
  2. (NW/TA) x 100
  3. TA/TL
  4. TL/NW
103
Q

Types of Balance Sheet based on Asset Valuation

A
  1. Market Basis BS
  2. Cost Basis BS
104
Q
  • Assets are valued at current market value less selling cost
  • more accurate measure of current financial health and collateral available for loans, so often used by lenders
A

Market Basis BS

105
Q
  • Assets are valued at purchase cost minus depreciation
  • More conservative estimate of financial condition, particularly during periods of inflation
  • Can misrepresent the true value of the business- more useful for measuring financial progress over time without considering the effects of inflation
A

Cost Basis BS

106
Q

One of the most common methods of determining profitability

A

Cost and Return Analysis

107
Q

Cost and return analysis is sometimes termed as?

A

farm income analysis

108
Q

Classification of Farm Returns

A
  1. cash returns
  2. non-cash returns
109
Q

for value of farm products sold

A

cash returns

110
Q

products used at home, given away, or
products paid in kind for harvesting the produce

A

non-cash returns

111
Q

Classification of Costs According to the manner in which they are incurred

A
  1. cash cost
  2. non-cash cost
112
Q
  • actual money has been paid
  • also referred to as “out of pocket” costs
  • also known as explicit cost
A

cash cost

113
Q

no direct cash outlays, also known as
implicit or imputed cost like unpaid family labor and payment in kind for harvesting the produce

A

non-cash cost

114
Q

Classification of Costs According to the level of output

A
  1. variable cost
  2. fixed cost
115
Q

costs that vary directly with the level of
output , not incurred if nothing is produced.

A

variable cost

116
Q

committed cost and do not vary during the production process

A

fixed cost

117
Q

Types of Measures of Profitability

A
  1. gross margin or return above variable cost
  2. net farm income
  3. return above cash cost
  4. operator’s labor income
  5. return on capital
  6. percent return on capital
  7. net profit - cost ratio
118
Q
  • represents the value of production left to the farmer after deducting the Total Variable Cost (TVC) which include materials, labor, and power cost
  • It is the relevant profit calculation for short-run decisions.
A

Gross Margin or Return Above Variable Cost

119
Q

(RAVC) =

A

Total Farm Income – Total Variable Cost

120
Q
  • also known as the return above all cost
  • represents the amount the farmer gets from his capital, labor and management after paying all operating expenses.
  • It is more applicable to market-oriented farms
A

Net Farm Income

121
Q

(NFI) =

A

Total Farm Income – Total Farm Expenses

122
Q

represents the value of production left for the farmer after paid-out cost

A

Return Above Cash Cost

123
Q

(RACC) =

A

Total Farm Income –Total Cash Cost

124
Q

this measures the amount of cash the farmer gets for his labor and management after paying both operating expenses and the imputed interest for the use of capital or investment

A

Operator’s Labor Income

125
Q

OLI =

A

Net Farm Income (NFI) - Interest on Average Inventory

126
Q

the amount of cash the farmer gets after paying the operating expenses and the estimated value of the operator’s labor and management

A

Return on Capital

127
Q

(ROC) =

A

NFI – Value of Operator’s Labor and Management

128
Q

represents the rate of return on capital invested expressed in percentage.

A

Percent Return on Capital

129
Q

(%ROC) =

A

(Return on Capital/Average Capital Investment) x 100

130
Q
  • Determines the rate of return to the farmers
  • amount earned by the farmer for every peso spent on production
A

Net Profit – Cost Ratio

131
Q

Net Profit – Cost Ratio =

A

Net Farm Income / Total Cost

132
Q

expressed either in monetary values or
some rate or percentage relating to capital use

A

Economic efficiency

133
Q

Types of Measures of Efficiency

A
  1. Physical (crop or livestock) efficiency
  2. Economic efficiency
134
Q

True or False

Rate of capital turnover = value of farm production/total capital
used

A

True

135
Q

Types of physical efficiency

A
  1. Yield per hectare
  2. Yield per tree
  3. Crop yield index
  4. Livestock efficiency or yield per animal unit
  5. Labor efficiency

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