Fixed assets are characterised by a long useful life (generally exceeding 1 year) and a relatively high value. Examples: Land, permanent plantations: land that has been set aside for perennial crops (orchards, nurseries), primary stock, buildings and structures: (fences, silos, bridges), vehicles, machinery, long-term deposits, etc.
Current assets/resources are assets that are expected to generate economic benefits over the next 12 months. Examples: circulating stock, crop production in progress: (not included in perennial plantations), production stocks: these are products for consumption on the farm (hay, silage) and for sale (potatoes, cereals), purchased stocks: inputs purchased for production (mineral fertilisers, plant protection products, fuel), as well as spare parts and materials for current repairs, receivables, savings: held in the bank, cash: cash held by the farmer
Liabilities, or the source of financing of assets. Farm assets can be financed from two sources:
equity, which determines how much of the farmer’s property is owned by the farmer, and external capital, which is the farm’s current liabilities arising from the past.
- long-term loans: part of the farm’s debt (most often investment debt, i.e. taken out to create a fixed asset), the repayment period of which is spread over several years,
- short-term loans and advances: current debt with banks and financial institutions with a repayment period of up to one year,
- accounts payable: debts relating to collected funds and services not yet paid for.
Business plan – a company document containing an assessment of the profitability of a business venture. Drawn up for the internal and external needs of the enterprise – for example, in order to obtain sources of investment funding.
Capital expenditures – financial or in-kind expenditures aimed at the creation of new fixed assets or the improvement (reconstruction, extension, or modernisation) of existing fixed assets, as well as expenditures for the initial equipment of the investment.
Environmental costs are an umbrella term for the various costs associated with environmental activities and environmental impacts.
Business model – the long-term method adopted by a company to gain competitive advantage and ensure profitability. It usually answers the questions: at which target group is the product aimed (marketplace, intermediary, retail chain, etc.), what values (other than those of the competition) are to be offered to customers, strategies for delivering these values, how, how to price.
Cultivation contract – a contract in which an agricultural producer undertakes to produce and deliver agricultural products to a contracting party, who is obliged to take them over at an agreed time and price. In the Polish legal system, the cultivation contract is regulated by Articles 613-626 of the Civil Code.
Alternative contingency plan – a plan to use your assets to achieve a similar scale of results if your venture fails
Feasibility analysis – means an assessment and analysis of a project’s potential to support the decision-making process by objectively and rationally identifying its strengths, weaknesses, opportunities and risks, the resources that will be required to implement the project and an assessment of the project’s chances of success.
Profitability analysis determines the extent to which a company is able to generate profit through its assets or equity.
Investment is the placement of funds and other resources in a venture with the aim of increasing the owner’s wealth.
Investment loan – a bank loan to finance projects aimed at the replacement, modernisation or enhancement of fixed assets
Working capital loan – a bank loan intended to finance the day-to-day operations of an enterprise, e.g. the purchase of means of production or small equipment, etc. Working capital loans allow the company to ensure liquidity – i.e. they enable the company to settle its current obligations in the absence of cash.
Trade credit/commodity credit – credit extended by sellers of goods or services to their customers, consisting in the delivery of the object of the transaction and a contractual deferment of the payment date.
Cash/retail/consumer credit – credit granted, for private purposes, i.e. not related to business and professional activities. It can take the form of e.g. a loan, credit, deferred payment (instalment purchases in a shop)
Revenue – any financial inflow received from an activity.
Income – all income earned, remaining after deducting the costs of earning the income and social security/insurance contributions.
Turnover – All proceeds from the sale of goods and services, less the amount of income tax payable.
Profit is the positive financial result of a business, it means that it has more revenue than its costs. Profit is the basis for investment and growth of the company.
Financial analysis – a collection of information about a company’s performance and financial position, necessary for the management process and used by the company’s environment: lenders, counterparties, investors, auditors, etc.
Financial ratios – ratios that describe the relationship between certain economic quantities and allow the analysis of the economic situation and the prediction of future changes. The following groups of indicators can be distinguished:
- liquidity ratios
- debt ratios
- profitability indicators
- performance indicators
Liquidity – the ability of an entity to pay its obligations when due
Debt – the ratio of liabilities to assets of the holding
Profitability is the level of performance of a business, for example. It determines whether the resources and efforts expended have produced tangible results
Creditworthiness – the ability to repay the loan taken out, with interest, within the time limits specified in the contract.
Clause – a stipulation, provision or condition in a contract. They are placed in contracts to clarify the rights and obligations of the parties to a particular contract.
Own contribution – the financial resources that the person applying for a loan should have.
Foreign trade restrictions – restriction of exports (imports), caused by the application of moves that damage the economic interests of the country concerned.
Insurance – its function is to mitigate or fully eliminate the adverse effects of adverse events by spreading the burden of this mitigation over a number of individuals who are threatened by such events.
Cover – the insurer’s obligation to pay benefits to an insured person injured as a result of a situation covered by the contract, or to a beneficiary
Sum insured – is the upper limit of the insurance company’s liability, i.e. the maximum amount of compensation you can receive in the event of a covered loss.
Insurance premium – the obligation of the policyholder to pay specified amounts to the Insurance Company in return for the cover it provides.
Insurance risk – the possibility of an insured loss occurring. Insurance products are created based on the risk of random events, i.e. events that are beyond the control of or unintended by the victim and whose effects cause losses.
Outsourcing – using external sources. Outsourcing is the delegation of tasks, functions, projects and processes to an external company for execution.
Operating costs are those costs directly related to the business
Source of financing – the stock of cash (capital) that finances a particular activity or venture. Sources of financing for a company’s assets are shown as liabilities on its balance sheet. Sources of financing for an activity can be classified as follows:
- by source of capital:
- Equity:
- External capital
- long-term, including
- investment loans
- leasing
- short-term, e.g.
- working capital loans
- trade/purchase credit
- factoring
- loan from the non-banking sector
Farm competitiveness – the ability to plan, create and sell a product that is more attractive than those of competitors.
Variable costs are those costs that are directly related to production. Costs depend on the volume of production, because as the volume of production changes, the value of variable costs also changes. For example, the costs of: seeds and seed potatoes, plant protection products, feed, etc.
Fixed costs do not change with a change in production volume. This means that a decrease in production does not change fixed costs. E.g. taxes, costs of external factors (rents and leases, interest), costs of running repairs, maintenance and inspection, production services and property and communication insurance.