Agribusiness Management Final- Study Guide

a description of how the firm will gain its competitive edge in the marketplace

An agribusinesse's purpose and object should include...

- inventory can be subject to shrinkage - inventory has carrying costs - it can become obsolete - it has value/costs

How does inventory impact profit?

- measure progress toward goals and alerts management to serious deviations - includes measures of individual's progress and the progress of the entire departments and the business

What do the controls of the controlling function do?

lower level managers to develop decision-making skills

What does decentralized management allow?

- %DeltaQ/ %DeltaP - The change in quantity demanded relative to changes in prices and income - can be elastic, inelastic, or unitary

What is elasticity?

- a result of changes in technology - dealt with by calculating break-even cash flows - a result of changes in government farm programs - dealt with by calculating alternative outcomes

What is risk and uncertainty?

participatory

the _________ style of management involves employees in decision-making and the planning of work objectives

inventory, accounts receivable, cash

what are not examples of assets?

- belonging - self-fulfillment - safety - physiological needs - emotional needs

what are the 5 human needs?

operating, financial, and lease-to-purchase

what are the three main types of leases?

average annual rate of return

what capital budgeting method does NOT use the time value of money?

return on investment ratio

what equation measures profitability?

accounts payable

what is an example of a business asset?

- income remaining to cover operating expenses - revenue from sales minus cost of goods sold - equivalent to contribution - what remains after subtracting cost of goods sold from sales revenue

what is gross margin?

utility maximization

when given a choice, consumers will always elect the item that gives them the highest satisfaction because of the economic principle of:

-when high, makes it harder for the firm to find acceptable projects - a firm's required rate of return on its equity capital - important to the long-run financial survival of a firm - affected by taxes unless it's 100% of the investment is financed by debt

4 points about discount rates...

- for each 1% increase in price, the quantity demanded of granola decreases by 1.5%. - total revenue would go up if the firm decreased the price of granola. - the demand of granola is elastic. - granola is a normal good.

If the calculated price elasticity of granola is -1.5, then what can we say about it?

91.6%

If the seasonal price index number for april is 91.6, what percentage of the average annual price is the price in April during a normal yearr?

- sales managers - able to directly impact profit - authorized to make decisions

Line personnel are...

True

T/F The agrifood and fiber system includes the agribusiness firms that are input suppliers, producers, commodity processors, food manufacturers, food distributors, and food retailers.

True

T/F The budgeting process is valuable because the agribusiness manager is required to think clearly through the firm's cost and revenues.

True

T/F a business organized by business function means that there may be a sales unit, an accounting unit, and a manufacturing unit, and management is more centralized.

true

T/F a business with a debt to equity ratio of 0.69 means that creditors have a relative investment of $0.69 per dollar put up by the owners of the firm and also means that their business is solvent.

True

T/F demand is a schedule of how much consumers are willing and able to buy at various prices

true

T/F net working capital is current assets minus liabilities

False; only plot various data points, not all of them

T/F the purpose of computing a moving average for a price series is to reduce the impact of short-run fluctuations by plotting every single data point.

True

T/F the role of marketing is to bridge the gap between the conflicting needs of producers and consumers by completing the production process.

False

T/F when it comes to the four principles of organizational design, working units need to be all inclusive of everyone in the business from staff to junior and senior management.

- positive, long-term profit - the lowest risk - benefits sooner than later - highest long-term profit among the alternatives

The best investment capital are the ones that provide...

-savings deposits - new borrowings - savings withdrawals - repayment of operating loans

The cash flow budget is composed of these major components?

Promotion, Price, Product, and Place

The four P's of marketing are....

- implement the 3 management functions (planning, organizing, controlling) - success relies on good leadership skills and the manager's ability to motivate the employees

The main objective of the directing function is...

determine the best position relative to competition and consumer needs.

The main objective of the planning function is...

- development of organizational scheme - accomplishment firm's purpose and objectives efficiently and effectively - selection of legal structure (sole proprietorship, partnership, etc)

The organizing function of management does what?

revenues earned and expenses incurred

The profit and loss statement records ________ _______ and ______ __________ for the current accounting period.

operating, cash flow, and capital expenditures

What 3 budgets are related to each other?

- cooperative - s-corporation - LLC - non-profit organization

What are 4 examples of corporations?

- freight installation - acquisition cost - borrowed funds - salvage value of replaced assets

What are examples of data that go into calculating the initial investment of a capital asset?

Operating budget, cash low budget, capital expenditures budget

What are the 3 major types of budgets?

- accounts receivable - plant size - evaluating efficiency - break-even analysis

What are the 4 costs items that managers must monitor?

- problem identification - determine alternative courses of action - analyze the alternatives - select best alternatives - implement decisions - follow up

What are the 6 steps of the decision-making process?

Those that relate the impact of macroeconomic variables to change in a firm's sales and costs.

What are the best types of forecasts?

- 4 years for hogs - 8-10 years for cattle

What are the biological trends/lags for hogs and cattles?

Planning, Organizing, Controlling, Directing

What are the four functions of management?

- internal rate of return - net present value - benefit/cost ratio

What capital budgeting methods use the time value of money?

- initial investment - discount rate - terminal value - net cash flows

What data is necessary to conduct a capital budget analysis and decision?

- offer fast performance feedback - keep work units small enough that people have a sense of involvement and achievement - can be accomplished with minimum numbers of management levels - put people in charge of their own destiny

What do autonomous profit centers do?

-a variation of the net present value method - the discount rate where the present value of an investment's benefits equal the present value of its cost. - better than the average rate of return method because it incorporates the time value of money. - the discount rate when NPV equals zero.

What is the internal rate of return method in capital budgeting?

-lease payments are usually less than a down payment if the item was to be purchased - an operating lease has charges based on use (monthly, weekly, etc) - lease payments are tax-deductible for a basic financial lease - leasing is often beneficial to start-up businesses who do not have excess capital on hand to invest in new equipment.

What is true about a lease?

a depreciable asset needs to be replaced or cost-reducing/income-increasing investment is adopted.

When do capital budgeting investment opportunities occur?

Both +$0.755/year and +$0.65/month

You determine a trend line for eggs starting at $1.85/dozen at the beginning of January 2012 and ending with $4.95/dozen by December 2015. What is the trend?

taxes

_________- - impact cash flows because interest expense and depreciation are tax-deductible. - when lower, can increase the likelihood of investment in capital assets by the business - have no impact on discount rates unless 100% of an investment is financed

diminishing marginal utility

consumers consume a variety of goods because of the economic principle of:

when marginal revenue equals marginal cost

profit is maximized when _______ equals ____________