ARD Static

Lecture – 14
 Practice Question
Q. The word extension is derived from ________

A. Latin
B. Greek
C. English
D. Hindi
E. None of the above

Ans: Latin
 Agriculture Economics

Farm Planning

Farm planning is a process to allocate the scarce resources of

the farm to organize the farm production in such a way as to
increase the resource use efficiency and the income of the
farmer.

Farm Budgeting

Budgeting is a method of analyzing plans for the use of

agricultural resources at the command of the decision-maker.
 Agriculture Economics

Partial budgeting

It refers to estimating the costs and returns and net income of a

particular enterprise. It refers to estimating the returns for a part
of the business i.e., one or few activities for example

Enterprise budgeting

Enterprise is defined as a single crop or livestock commodity.

Most farms consist of a combination of several enterprises.
 Agriculture Economics

Cash flow budgeting

A cash flow budget is a summary of the cash inflows and

outflows for a business over a given time period.

Complete Budgeting

It is also called total budgeting. It refers to preparing a budget

for the farm.
Complete budgeting considers all the crops, livestock, methods
of production, and aspects of marketing in consolidated form
and estimates costs and returns for the farm.
 Important Terminology
Net Capital Measures the degree of financial safety by NCR = Total Assets /
Ratio comparing the present position of the business Total Liabilities
with a previous date

Current Ratio Measures the ability of the farm to meet its current CR = Current Assets /
liabilities Current Liabilities

Acid Test Ratio Measures liquidity by considering only highly ATR = Quick Assets /
liquid current assets Current Liabilities
 Important Terminology
Debt Equity Compares total liabilities to owner's equity or DER = Debt /
Ratio net worth Owner’s Equity or
Net Worth

Total Assets Measures how efficiently assets are TATR = Net Sales /
Turnover employed Total Assets
Ratio

Net Income to Measures the efficiency of capital employed NITAR = Net Income
Total Assets on the farm / Total Assets
 Important Terminology
Equity Value Indicates the financial position of the farm EVR = Net Worth /
Ratio business Total Assets

Crop Yield Compares the yields of all crops on a farm to -

Index average yields in the locality

System Index Determines the efficiency of combining -

different enterprises on a farm
 Important Terminology
Operating Represents the proportion of gross income OR = Total
Ratio absorbed by operating expenses Operating Expenses
/ Gross Income

Fixed Ratio Calculates the total fixed costs as a -

proportion of gross income

Gross Ratio Expresses the percentage of gross income GR = Total Expenses

absorbed by total costs / Gross Income
Q. What is the Operating Ratio under farm management?

A. Total operating income/Gross income

B. Total operating expenses/Gross income
C. Gross expenses/Gross income
D. Net Assets/Net income
E. None of the above

Ans: Total operating expenses/Gross income

Q. What is the net capital ratio?

A. Total operating income/Gross income

B. Total operating expenses/Gross income
C. Gross expenses/Gross income
D. Net Assets/Net income
E. Total assets/Total Liabilities

Ans: Total assets/Total Liabilities

Q. What is the current ratio?

A. Total Operating Expenses / Gross Income

B. Total Expenses / Gross Income
C. Total assets/Total Liabilities
D. Total Operating Expenses / Gross Income
E. Current Assets / Current Liabilities

Ans: Current Assets / Current Liabilities

Q. What is the Equity value ratio?

A. Net Worth / Total Assets

B. Total Operating Expenses / Gross Income
C. Total Expenses / Gross Income
D. Total assets/Total Liabilities
E. Total Operating Expenses / Gross Income

Ans: Net Worth / Total Assets

Q. What is the Total Assets Turnover Ratio ?

A. Net Worth / Total Assets

B. Total Operating Expenses / Gross Income
C. Total Expenses / Gross Income
D. Net Sales / Total Assets
E. Total Operating Expenses / Gross Income

Ans: Net Sales / Total Assets

 Practice Question
Q. What is the Debt Equity Ratio?

A. Net Worth / Total Assets

B. Debt / Owner’s Equity or Net Worth
C. Total Expenses / Gross Income
D. Net Sales / Total Assets
E. Total Operating Expenses / Gross Income