BOTS\ryANA UNIVERSITY OF AGRICULTURE
AND NATURAL RESOURCES
FACULTY OF AGRICULTURE
UNIVERSITYEXAMINATI0NSFoRAGRICULTI]RALECONOMICS
AEB 322 _ FARM BUSINESS MANAGEMENT
TIME:08:00-10:00HRS
DATE: 11.05.2017
INSTRUCTIONS
papel'
Candidates are required to answer a total of
FO(IR 9y of flVn questions in this examination
All ansiers should be written in the answer book provided'
All íull
QUESTION t IS COMpuLsoRy. parts of a question indicate the distribution of
questions carry equal mqrlrs and marlcs shown against
marlcs for parts within the question'
DoNoTOPENTHISPAGEUNTILYOUHAVEBEENTOLDToDoSo
BY THE SUPERVISOR / INVIGILATOR
VIOLATIONOFACADEMICINTEGRITYPRACTICESCARRIESHEAVYPENALTIES
t
QUESTION 1 [2s MARKS]
PART A: MULTIPLE CHOICE [20 Marks]
a) Choose the best anslver [2 Marks each]
Ð In managing financial resources risk as an entrepreneur, you can do the following
A. Timely pay taxes and insurance.
B. Control living expenses.
C. Heavily depend on collateral.
D. Both A and B.
iÐ Basic business fundamentals include the following EXCEPT
A. Keep business size consistent with available capital.
B. Select a business that is capital-intensive'
C. Keep family labour fully engaged.
D. Devote adequate time to development of management capability
iiÐ Ownership costs are
A. Independent of the level of output.
B. Are equal to fixed costs.
C. Are equal to variable costs.
D. Both A and B.
iv) A winning strategY is one that
A. Matches the organizational capabilities and aspirations'
B. Leads to a sustainable competitive advantage
C. Enhances profitabilitY.
D. All of the above.
Use the following information to answer questions (v) to (vii)
Consider an asset that costs P50, 000 to buy. The estimated useful life span of the asset is
5 years and the resale value is estimated to be 10% of the initial cost.
v) The residual value for this asset will be
A. P10,000
B. P5,000
c. P9, 000
D. P50, 000
vi) The annual charge for depreciation will be
A. P10,000
B. P5, 000
2
c. P9, 000
D. P50, 000
vii) The book value of the asset at the end of year 3 will be
A. P32, 000
B. P41,000
c. P23,000
D. P50,000
viii) Which of the following is not a reason for keeping records?
A. Taxation
B. Stewardship
C. Entrepreneurship
D. Management
ix) All of the following are physical records except;
A. Crops grown
B. Farm map
C. livestock numbers
D. Sales and purchases
x) Debt/asset ratios greater than I show that the business is;
A. Solvent
B. Insolvent
C. Overtrading
D. Flexible
3
b) Write à 4T" for true if the statement is true and ân 6rF" for false if the statement
is false in each of the following. [lmark each]
Ð A low liquidify ratio is due to overtrading.
ii) Debtors are current liabilities.
iii) Keeping records of dead animals is just a waste of time.
iv) Comparing prof,rt margins in relation to other businesses is called comparative analysis.
v) Accrual accounting provides less accurate estimate of reported income than cash
accounting.
QUESTION 2 25 Marksl
a. Differentiate between the following concepts tel
Ð Uncertainty and Risk. t3l
ii) StrategicandOperationaldecision-making t3l
iiÐ Reducing balance method and sum of the year's digits method. 13l
b. List any fìve (5) factors to consider in starting an agri-business l5l
c. Outline the four strategic approaches a business can use to build competitive
advantage. t4l
d. Outline the steps followed in strategic decision-making. t7l
4
QUESTION 3 [25 Marks]
a. In making loan assessments and lending decisions banks use the CAMPARI loan
assessment tool.
i) The "C" in CAMPARI stands for character. What do the other letters in the
acronym stand for? tl]
ii) Discuss two (2) "characters" that can influence the bank to consider you a
"good" risk and consider lending you money for your agri-business. l4l
b. Risks that farmers face can be broadly categoñzed into business, institutional and
financial risks.
i) List and discuss the two sources of business risks. t6]
ii) Discuss any three (3) strategies farmers can use to deal with risk.
t6l
c. Discuss the three (3) main types of decisions farm managers have to make. t6]
d. List any two (2) major challenges of entrepreneurship. I2l
QUESTION 4 [25 Marks]
a. Research has found out that Muscovy ducks perform better than Guinea fowls in
Seronga, in the Ngamiland district. Assume therefore, that one farmer decides to take
this recommendation and increase the production of Muscovy ducks by 100 units and
reduce Guinea fowls by 100 units.
The following information is provided: Muscovy ducks are marketed at an average
weight of 4kg and the current price is P50 per kg. Meanwhile Guinea fowls are
marketed at an average weight of lkg and the cunent price is P35 per kg. The farmer
has been selling 80 Guinea fowls per month and expects to sell the same number of
Muscovy ducks per month.
The costs incurred when producing Muscovy Savings made from Guinea fowls
ducks are: are
Pula Pula
Feed 500 Feed 300
Medications 150 Medications 100
Labour 1,000 Labour 800
Transport costs 900 Transport costs 900
5
Water 100 Water 50
Electricity r00 Electricity 60
(Ð Prepare Partial budget for the farmer: [1 8]
(iÐ Is the recommended substitution viable? Justif, your answer' tll
b. Distinguish between a complete budget and a capital budget. t6l
QUESTION 5 [25 Marks]
Suppose you have the following information:
Cash Account P6 000, Inventory (crops and livestock) P92 000, accounts receivable P I 200,
Machinery and equipmentP6T 500, breeding stock P12 000, buildings P27 000,land P100
000, Accounts payable P6 000, taxes payable P8 000, Accrued interest P5 700, Real estate
debt P40 000 and Wages P6 000.
a. Using the information above to prepare a balance sheet l20l
b. Calculate (and interpret) the following ratios; lsl
i) DeblAsset Ratio
ii) Equity/ Asset Ratio
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