Comprehensive Review: Agribusiness Finance, Operations & Business Law

These question-and-answer flashcards cover the essential concepts, definitions, formulas, and case principles across agribusiness finance, financial analysis, capital budgeting, operations & supply-chain management, human-resource management, contract & commercial law, and modern retail operations—including omnichannel strategies and common store-management issues.

What are three key reasons managers rely on financial statements?

To make informed decisions, report to external parties (investors, banks, government), and ensure accurate, up-to-date financial information.

Which two broad accounting areas use financial statements?

Management accounting (internal) and financial accounting (external).

State the accounting equation shown on a balance sheet.

Assets = Liabilities + Owner’s Equity.

Give two examples of current assets.

Cash and accounts receivable (inventories are a third common example).

What distinguishes long-term liabilities from current liabilities?

Long-term liabilities are debts payable in more than one year; current liabilities are due within one year.

Which financial statement summarises revenues and expenses for a period?

Income Statement (Statement of Profit & Loss).

List the basic steps used to compute gross profit on an Income Statement.

Net Sales – Cost of Goods Sold = Gross Profit.

Name the three activity categories in a Statement of Cash Flows.

Operating, Investing, and Financing activities.

Why is a good record-keeping system described as cost-effective?

Because its benefits in error prevention and decision support outweigh its implementation cost.

What are the four main financial-statement analysis focuses?

Profitability, Liquidity, Solvency (long-term ability), and Efficiency.

Which analysis expresses every item as a percentage of a base figure for easy comparison?

Common-size analysis.

Define ROE and list its three drivers in the DuPont/ROE model.

Return on Equity; driven by Return on Sales, Asset Turnover, and Financial Leverage.

Give one limitation of ratio analysis.

Different accounting methods between firms can distort comparisons.

Why is cash termed “king” in agribusiness finance?

Because cash is critical for daily operations, asset purchases, and working-capital cycles.

Name the three primary sources of business capital.

Owner investment (equity), loans (debt), and retained earnings.

What percentage of current liabilities is often recommended as a cash reserve?

Roughly 20–25 % of current liabilities.

Differentiate between short-term and long-term loans in agribusiness.

Short-term loans (≤1 year) cover temporary needs; long-term loans (> 5 years) finance land or buildings.

Explain the principle of financial leverage.

Using debt can raise returns if investment earnings exceed borrowing cost, but it also increases risk.

What is a pro forma statement?

A projected financial statement used for budgeting and financing decisions.

List two external financing sources besides commercial banks.

Trade credit and insurance companies (others: finance companies, cooperatives).

Define capital budgeting.

The process of evaluating long-term investments’ effects on profit, liquidity, and risk.

Which capital-budgeting method ignores the time value of money yet measures how quickly cash is recovered?

Payback Period.

What decision rule applies to Net Present Value (NPV)?

Accept an investment if NPV is positive (> 0).

At what point do you accept a project using Internal Rate of Return (IRR)?

When IRR exceeds the firm’s required rate of return (hurdle rate).

In operations management, what are the two major components?

Production Planning and Supply Chain Management.

Give two unique operational challenges for agricultural products.

Seasonality of production and perishability of goods.

State two key factors in plant-location decisions.

Proximity to raw materials and access to transportation (others: labour cost, tax incentives, market distance).

What is the main objective of layout planning?

To maximise efficiency of space, labour, and workflow.

Name the four common facility-layout types.

Process, Product, Hybrid, and Fixed-Position layouts.

Which process-design factor weighs machine use versus human labour?

Capital intensity.

What are two goals of job design?

Achieve production objectives and provide employee satisfaction and safety.

Define Supply Chain Management (SCM).

Coordinating all activities from raw-material purchase to delivery of finished goods to customers.

Why is inventory control critical in SCM?

Inventory can represent 35–50 % of current assets and incurs high carrying costs.

Differentiate MRP and JIT production-control systems.

MRP is a push system driven by schedules; JIT is a pull system producing only when needed to cut inventory.

What distribution strategy places inventory close to customers for faster delivery?

Forward placement (decentralised warehouses near markets).

List three key HR management functions.

Recruitment & selection, performance appraisal, and compensation & benefits (others: training, promotion, termination).

Why are job descriptions and specifications important?

They clarify responsibilities and qualifications, aiding accurate recruitment and evaluation.

Identify two common employee-orientation goals.

Introduce the organisation and build working relationships before starting tasks.

Give one purpose of performance appraisal.

To improve employee performance and guide promotion or training decisions.

What is the definition of a contract under the Contracts Act 1950?

An agreement enforceable by law.

State the six essential elements of a valid contract.

Offer, Acceptance, Intention to create legal relations, Consideration, Certainty, and Capacity.

Explain privity of contract.

Only parties to a contract can sue or be sued on it, with limited exceptions.

Distinguish between a condition and a warranty in contract terms.

A condition is fundamental; its breach allows contract termination. A warranty is minor; breach gives damages only.

Name two factors that can make a contract voidable.

Coercion and undue influence (others: fraud, misrepresentation, mistake).

What remedy orders a party to perform exactly as promised?

Specific Performance.

In Wrench v Hyde, why was no contract formed?

A counter-offer by Hyde destroyed the original offer; it could not be revived.

What principle did Carlill v Carbolic Smoke Ball Co. establish?

An advertisement can constitute a binding unilateral offer accepted by performance.

Under the Sale of Goods Act 1957, how are ‘goods’ defined?

Movable property other than money and actionable claims.

Differentiate existing goods from future goods.

Existing goods already belong to the seller; future goods are yet to be manufactured or obtained.

What is the basic rule of title transfer in sales (nemo dat)?

A seller cannot pass better title than he possesses.

Give two implied conditions under a sale of goods.

Goods match description and are of merchantable (acceptable) quality (others: fit for purpose, right to sell).

State one right of an unpaid seller.

A lien over the goods until paid (others: stoppage in transit, resale).

What relationship does the law of agency govern?

The relationship where an agent acts on behalf of a principal, affecting the principal’s legal position.

List two ways agency can be created without express words.

Implied appointment and agency by necessity (others: ratification, estoppel).

Name two duties owed by an agent to the principal.

Follow instructions and avoid conflicts of interest (others: keep accounts, exercise care, no secret profits).

How may an agency terminate by operation of law?

Death, insanity, or bankruptcy of either principal or agent (among others).

What landmark case confirmed separate legal personality of companies?

Salomon v Salomon & Co Ltd.

Define perpetual succession.

A company continues to exist regardless of changes in membership.

Give two situations where courts may lift the corporate veil.

Fraud or avoidance of legal obligations (others: having fewer than two members).

What is a floating charge?

A security interest over changing assets that crystallises into a fixed charge upon default or winding up.

State one core fiduciary duty of directors.

To act bona fide in the best interests of the company.

Under the Companies Act, what document sets out a company’s internal rules?

The Articles of Association (now often called Constitution).

Contrast company liability with partnership liability.

Company members’ liability is limited; partners have unlimited personal liability for firm debts.

What is the maximum typical number of partners allowed under the Partnership Act 1961?

Twenty partners (except certain professional firms).

Give one right partners share under s.26 of the Partnership Act.

Right to take part in management (others: share profits, inspect books).

Define hire purchase.

An agreement to hire goods with an option to own them after all instalments are paid.

When may a hire-purchase owner repossess goods without court leave?

Before the hirer has paid 75 % of the total hire-purchase price.

What modern retail concept provides a seamless experience across all sales channels?

Omnichannel retailing.

Name two features of an effective omnichannel system.

Click-and-collect services and unified customer data across platforms (others: in-store returns for online purchases).

Give one major challenge in implementing omnichannel strategies.

High cost of integrating IT systems and staff training.

List three key components of store management.

Store layout, inventory management, and staff management (others: customer service, cleanliness, promotions).

What is a ‘hot zone’ in retail layout planning?

An area with high customer traffic where best-selling items are displayed.

Identify two common operational issues in retailing.

Stock-outs due to poor inventory control and high employee turnover (others: supply-chain delays, tech inefficiencies).

What technology helps retailers track stock in real time?

A modern Point-of-Sale (POS) system with automated inventory tracking (or RFID).

Why can excessive promotions hurt a retailer’s profitability?

They reduce margins and may train customers to wait for discounts, lowering overall revenue.

List two suggested improvements for retail operational issues.

Regular staff training with clear SOPs and adoption of real-time inventory systems.

Which HR activity immediately follows recruitment and selection?

Employee orientation/induction.

What is the main objective of supply-chain ‘quick response’?

To reduce time to market and meet customer demand faster.

Explain ‘forward placement’ in distribution strategy.

Storing inventory closer to customers to speed delivery at higher carrying cost.

What does HACCP stand for, and why is it important?

Hazard Analysis and Critical Control Points; it ensures food safety and product quality.

Name two key performance metrics in operations productivity.

Output per labour hour and cost per unit produced.

What is the primary purpose of benchmarking in financial analysis?

Comparing current performance against past periods, budgets, or industry averages.

Which financial-statement category evaluates ability to meet short-term obligations?

Liquidity ratios (e.g., current ratio, quick ratio).

What does a debt-to-equity ratio measure?

The proportion of financing that comes from debt relative to owners’ equity (solvency).

In capital budgeting, what is ‘discounting’?

Calculating today’s value of future cash flows using a discount rate.

Why is job enrichment considered in job design?

To increase employee motivation by adding meaningful tasks and autonomy.

What HR document lists skills and qualifications required for a job?

Job specification.

State one advantage and one disadvantage of leasing equipment.

Advantage: conserves cash and allows easy upgrades. Disadvantage: often higher long-term cost and no ownership rights.

What are the three main sections in an academic exam timetable often labelled?

Morning session, Afternoon session, and Evening session.

Who are typical stakeholders interested in a firm’s financial statements?

Employees, customers, investors, suppliers, and the board of directors.

Define ‘asset turnover’ in the DuPont/ROE model.

Revenue generated per ringgit of assets; a measure of efficiency.

What is the effect of extraordinary items on ratio analysis?

They can distort results because they are non-recurring and not reflective of normal operations.

Give an example of agency by estoppel.

A principal’s conduct leads a third party to reasonably believe an agent has authority, binding the principal.

Why did the court decide Balfour v Balfour lacked intent to create legal relations?

Because domestic/social agreements are presumed not legally binding unless proven otherwise.

What does ‘crystallisation’ mean regarding floating charges?

The moment a floating charge becomes a fixed charge on specific assets upon certain events.

Name one protective right under the Consumer Protection Act 1999.

Implied guarantee that goods are of acceptable quality.

What system links production scheduling with material purchasing to minimise inventory?

Material Requirements Planning (MRP).

State two factors considered before a firm seeks additional funding.

Purpose and amount required; cost and source of funds (also repayment ability and impact on risk).

How can leverage increase a firm’s return on equity?

By financing with debt, profits attributable to equity holders rise if earnings exceed interest costs.

What is the primary goal of capacity planning?

To match production capability with expected demand while minimising cost and lost sales risk.