Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

AGBS 130 - Ag Finance > Terminology Quiz #1 > Flashcards

Terminology Quiz #1 Flashcards

1
Q

What is a firm?

A
  • a business/organization selling goods/services
    -an intermediary providing access to risky investment opportunities for investors
    -it pools capital, makes risky investment decisions, & manages these investments on behalf of investors who could not do so effectively or efficiently on their own
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

The goal of the firm

A

-to maximize wealth for the firm’s legal owners
-listen to the interests of stakeholders
-perform actions to increase value based on inflows-outflows & risk

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Cycle of Money

A

the movement of money from lender to borrower and back again, making both parties better off

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Main areas of finance

A

A. Corporate Finance
B. Investments
C. Financial institutions and markets
D. International finance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Corporate Finance

A

-the financial activities that support the operations of a business
-any financial activity that deals with a company, its money, and the decisions that affect the wealth of the owners

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Investments

A

-Buying and selling assets both real and financial
Concerned with:
-process of buying and selling
-accurate pricing of the assets (S & D - intangibles?)
-rules and regulations that govern players and activities in the transactions

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Institutions and Markets

A

-the organized financial intermediaries and the forums that promote the cycle of money
ex: banks, credit unions, insurance companies, pension funds, building societies etc.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Real Investments

A

land, property, buildings, commodities, etc.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Financial Investments

A

intangible (cash, stocks, bonds, etc.)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Asset Markets

A

equity (stocks), debt (bonds), derivatives (futures Ks & options), foreign exchange (currencies)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

International Finance

A

the multinational element of finance activities that considers:
-currency conversion issues
-rules and regulations that differ by country
-varying economic conditions - making risk assessment more difficult
-multinationals often finance operations locally

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Agricultural Finance

A

the management of financial resources in farming, including loans, investments, and risk management, is essential for enhancing productivity and profitability in this sector

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Components of Ag Finance

A

input, production, market-linked, and post-harvest financing, each catering to different stages of the agricultural cycle

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Characteristics of Ag Finance

A

seasonality, dependence on climatic conditions, and the variability of outputs, necessitating tailored financial instruments and support systems

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Capital Investments

A

decisions involve assessing costs and potential returns of long-term investments in equipment, technology, land, and infrastructure to maximize productivity (capital budgeting)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Cash Flow Management

A

effective management ensures the timely availability of funds for operations and investments, aiding farmers in navigating seasonal revenue streams and expenses (working capital management)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Capital Structure

A

managing the appropriate mix of funding sources for short and long term needs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Operating expenses

A

managing operating expenses is crucial for maintaining profitability; decisions include budgeting for labor, maintenance, inputs, and overhead costs while ensuring efficient operations

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Financial Planning

A

comprehensive planning incorporates forecasting, budgeting, and resource allocation strategies to support decision-making and operational objectives

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Risk in Ag Finance

A

potential for losses or adverse effects resulting from uncertainties related to production, market conditions and economic environments
ex: climactic events, price volatility, pest infestations, and fluctuations in consumer demand, all of which can disrupt anticipated financial outcomes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Risk Perception in Agriculture

A

varies among farmers based on experience, market knowledge, and financial literacy, affecting investment choices and willingness to adopt innovative practices

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Risk Managements Strategies

A

diversification of crops, insurance coverage, and utilizing forward contracts to secure prices against market volatility

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Tools & Techniques for Risk

A

risk assessment models, ag insurance products and price hedging techniques

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Important considerations in financial management

A

-reducing the likelihood of risks
-building risk-bearing capacity
-transferring risks to others

25
Temporal Aspects
investment decisions in agriculture require a careful consideration of time frames, as the agricultural production cycle can span from months to years before returns are realized
26
Risk Assessment
Evaluating the risk associated with agricultural investments involves analyzing how risk factors evolve over time and their potential implications on future cash flows and profitability
27
Investment Horizon
Understanding the horizon is vital for aligning financial strategies with both short-term operational needs and long-term growth objectives in agricultural finance
28
Impact of Time on Decision-Making:
Time influences decision-making processes, as longer time horizons can tolerate greater risk, whereas short-term pressures may necessitate more conservative approaches to financial management
29
Loans
institutions offer tailored loan products to provide capital for operating expenses, equipment purchases, and large-scale investments, all vital for enhancing productivity.
30
Insurance
Crop and livestock insurance are designed to provide financial protection against unexpected losses due to adverse events
31
Grants & Subsidies
Government programs and NGOs offer grants and subsidies aimed at supporting innovation, research, and sustainable practices
32
Investment Vehicles
Venture capital and private equity funds target agricultural ventures, providing necessary funding for expansion and technological advancements
33
Importance of Budgeting and Financial Planning
A critical practice in agricultural finance that aids farmers in planning their financial resources, tracking expenses, and making informed operational decisions
34
Cash Flow Analysis
Comprehensive analysis helps farmers maintain liquidity, plan for expenses, and optimize revenue collection to sustain ongoing operations effectively.
35
Financial Forecasting
Accurate forecasting allows farmers to anticipate revenues and expenses, enabling better strategic planning and resource allocation throughout the agricultural cycle
36
Investment Strategies
Developing clear investment strategies within financial planning ensures that resources are allocated efficiently towards yield-boosting technologies and practices
37
Digital Farming
This integrates technology with agricultural practices, utilizing sensors, IoT devices, and data analytics to optimize productivity and financial management
38
Data Analytics
This enables farmers to derive insights from data, improving decision-making regarding investments, risk management, and operational efficiencies
39
Tech Impact on Financing Options
technological advancements expand financing options by providing better risk assessments, creating new markets, and enhancing farmer access to financial products and services
40
Rational Financial Decisions
1. More value is preferred to less; 2. The sooner cash is received, the more valuable it is; and 3. Less risky assets are more valuable than (preferred to) riskier assets. (Is this always true?)
41
Examples of Management Objectives
-Maximize profits w.r.t. uncertainty & timing -Keep company’s customers happy -Maintain safe and enjoyable workplace -Attract and retain good employees -Foster good relationships with local community
42
Ag vs other sectors
-Relatively small businesses, with increasing consolidation -High proportion of capital assets required (e.g., land≈80%, buildings, equipment). Thus, high capital intensity & low asset liquidity. -Sequential, lengthy, and biologically driven production cycles. -Smaller operations have strong reliance on nonfarm income -information intensive but relationship-driven financing -High technology utilization (e.g., precision ag., genetics, biotechnology, etc.) -Dependent on global exports -Environmental sensitivity issues
43
Emerging Trends
-precision farming -sustainable ag investments -integrating digital solutions that align with evolving market demands
44
Sustainability
A growing emphasis in agriculture prompts financial institutions to develop funding mechanisms focused on environmental impact and social responsibility
45
Climate Change Adaptations
Financial products increasingly incorporate climate resilience metrics, offering farmers options to invest in technologies that mitigate climate-related risks
46
Regulatory Changes
This evolving landscape is prompting financial institutions to adapt their offerings to comply with new agricultural policies, sustainability criteria, and market standards.
47
Key Principles of Finance
1. Time value of money 2. The tradeoff between risk & return (All risk is not equal) 3. Cost of capital 4. Capital budgeting 5. Capital structure 6. Cash flow is what matters (Taxes bias decisions) 7. Competitive financial markets 8. The principal-agent problem (Ethical behavior)
48
Time Value of Money
-Money has different values at different points in time -investments providing faster payoffs are preferred to those with distant payoffs. -Why is the dollar worth more today? (earning potential, inflation, risk)
49
The Risk-Return Tradeoff
-Higher returns generally come with higher levels of risk. -allows managers to assess and manage risks effectively while seeking optimal returns on investment
50
Diversification
helps manage risk by spreading investments across different assets classes, industries, geographies, etc. to reduce the impact of individual investment losses on the overall portfolio
51
Cost of Capital
-The cost of obtaining funds for investments -essential for determining the minimum rate of return required to justify an investment. -influenced by factors such as interest rates, inflation, and market conditions
52
Capital Budgeting
-Evaluating potential investments and deciding which ones to pursue -essential for allocating scarce resources effectively and maximizing returns on investment because its techniques evaluate the profitability of potential investments
53
Capital Structure
-The mix of debt and equity financing used to fund investments -essential for balancing risk and return and optimizing the cost of capital -An optimal capital structure depends on factors such as a company’s size, industry, and growth prospects
54
Cash Flow
-Cash flow represents money in hand, that can be invested, & its earnings returned to shareholders -Accounting profits (earned) ≠ cash flows (in hand) -Incremental cash flows are important when evaluating business decisions.
55
Taxes bias decisions
-To evaluate the ‘true’ incremental cash flows of a project, measure on an after-tax basis -Governments also use taxes to bias decisions & encourage spending in certain ways
56
Marginal Tax Rate
rate applied to the next dollar of income earned.
57
Competitive Financial Markets
-New investments sometimes require raising $ -Firms must convince investors in the financial markets that their ideas are as good, or better, than other firms seeking funding -Investors trade quickly in response to new information. Thus, stock prices respond quickly. Managers should pay attention to what the market is telling them
58
The Principal-Agent Problem
-A conflict of interest arising when the principal hires the agent to act on their behalf, but the agent’s interests may not align with those of the principal
59
Ethical Behavior
-doing the right thing -People will forgive business errors, but the ramifications of unethical behavior are long-lasting because it eliminates trust, and without trust people and businesses cannot interact

AGBS 130 - Ag Finance (6 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions