FINANCIAL MANAGEMENT AND CONTROL OF THE AGRIBUSINESS (*DETERMINE THE…
FINANCIAL MANAGEMENT AND CONTROL OF THE AGRIBUSINESS
DEFINITION OF ECONOMIC
Concerned with the efficient use of limited or scare resources to achieve maximum
satisfaction of human materials wants
Economic is the study of how individuals and societies choose to use the scarce
resources that nature and previous generations have provided.
Human wants are unlimited, but the means to satisfy the wants are limited. Thus,
economics is the study of the use of scarce resource to satisfy unlimited human wants.
In large measure it is the study of how people make choices
Command economy : also known as planned economy system, centrally planned
economy, controlled economy or totalitarian economy
Mixed economy system: a combination between both capitalist and command
Capitalist system : also known as laissez-faire, market economy, free enterprise and
price mechanism, free market economy
Economy based on custom or religion (extreme case)
SCARCITY: The Central Economic Problem
Because the resources are scares, all societies face the problem of deciding what produce and how to produce and divide the products among their members.
Societies differ in who makes the choices and how they are made, but the need to
choose is common to all. Just as scarcity implies the need for choice, so choice implies
the existence of cost.
Human wants are unlimited but resources are not
Scarcity means that society has limited resources and therefore cannot produce all the goods and services people wish to have.
DETERMINE THE SOURCES OF FINANCE:
Sources of finance refers to the sources where funds to finance a particular project’s implementation costs can be secured.
These can be categorized into internal and external sources. The internal sources mainly come in the form of equity contributions from the entrepreneurs. These contributions can either be in the form of cash or other assets.
External sources of finance are mainly derived from commercial banks, finance companies and government agencies. It may come in the form of term loans, hire purchase or grants.
The total amount of funds that has to be sourced should equal the total project
implementation cost. This is to ensure that the project is fully funded and to avoid the risks of under-financing.
Components of sources of finance:
Equity contributions (cash and/or assets)
Term loan Hire purchase