Enterprise Budgets Flashcards
What do enterprise budgets provide an estimate of?
Enterprise Budgets
*Provide an estimate of the potential revenue, expenses and gross margin for a single enterprise
*Sometimes more than one budget for given enterprise – to test different production methods, technology, etc
What is enterprise budgets based on?
Base unit of such budgets, typically:
–1 hectare for crops, 1 head for livestock
What are extension services doe enterprises budgets?
*Extension services (e.g. Teagasc) prepare “typical” budgets for main enterprises (e.g. Management Data for Farm Planning)
–Advisors can adjust for particular farm (level of management, soil type, etc
Budget horizon is typically how long?
Depends on production process but typically 1 year
What is an enterprise budget?
What’s the steps involved in an enterprise budget?
What are the advantages and disadvantages of it?
*Need to know all of this information**
What does an enterprise budget form?
Enterprise budgets often form building blocks of partial and whole farm budget
What’s the basic structure as per enterprize GM accounts ? (4)
–Enterprise output per unit (head or hectare)
–Variable costs per unit
–Gross margin per unit
–Sometimes include fixed costs to calculate net margins
What does an enterprize budget give detailed presentation of?
Physical and financial (price/cost) projections in relation to output and variable costs
–NB: Must show quantity (units) and value (€)
–Highlight physical and financial performance targets to monitor
What does budget time horizon depend on?
*Budget time horizon depends on the length of the production process
–One year for most enterprises (e.g. dairy, suckler beef, tillage crops)
–Calf to beef system might have time horizon of 24 months or more
–20 – 22 weeks for pig weaner to finish enterprise
What are the basic preparation steps of an enterprise budgets ?
1- Determine agronomic practices for the enterprise
–The technical data of the budget
*Input levels:
–For crops: fertiliser levels, seed rates, planned use of sprays, contractor usage, etc.
–For livestock: stocking rate, feed budget (grazing and winter fodder allowances, concentrates), veterinary, etc.
2-Estimate enterprise output (revenue)
–Apply realistic price projections to the expected output levels
*Don’t forget to include value of outputs transferred to other enterprises on the farm
3-Estimate the enterprise variable costs
–Apply realistic price projections to the expected input level
What is important to normalise for enterprise budgets?
NB: Input, output& prices should be normalised projections
What can enterprise budgets provide?
Can provide useful projections of enterprise performance
–Highlight performance targets and key success factors
–May encourage more focussed approach to enterprise management
–Starting point for more comprehensive farm budgeting and analysis
However: what does the enterprise analysis not necessary budget form?
Why is the calculation of enterprize specific overheads difficult?
–Enterprise budgets don’t necessarily define a profit maximising situation
- Calculation of enterprise specific overheads is difficult but that does not mean that fixed costs should be overlooked.
