Livestock Economics, Marketing and Business Management

PROCUREMENT OF INPUTS AND FINANCIAL RESOURCES

Material procurement activities

• Procurement is a generic term, which includes the purchasing and related activities.
• Procurement activities are the selection of the vendors, establishing prices and services, preparation of orders and supply contracts, arrangement of scheduled delivery of the materials, proper maintenance of the records and relation with suppliers.
• Procurement activity also includes effective communication with the user and other services department as also with the supplier.
• Frequently, however materials management procedures require direct communication and discussions between the user and the supplier for technical reasons.
• The heart of the industrial management function is the procurement circle, which may be depicted as shown below  

Financial resources

• Resources are the inputs we give to the enterprise. Land, labour and capital are the basic resources. Any form of the capital can be considered as the financial resources.

Types of Financial Resources

Share Capital

• A Company issues shares of its capital to raise the fund for its business.
• This is done at the time of incorporation of the company and also subsequently as and when the need arises.
• There are two types of share capital
  • Preference capital
  • Equity capital
• Capital of the company is called the share capital. Those who acquire shares are called as the shareholders.
• They are the owners of the company. Shareholders cannot withdraw any part of the capital except under appropriate legal customeric provisions.
• Shareholders can transfer shares held by them to other persons.

Dividends

• Payment of dividend by a company to its shareholders is similar to the withdrawal made by the owner partners from the business.

Debentures and Bonds

• When large amount of money is required which cannot be obtained from a single source small amounts are borrowed from large number of people. This is done by issuing debentures/bonds.
• Each debenture has a face value which is the amount supposed to be borrowed from the debenture holder.
• Rate of interest, date of issue and date of maturity are indicated on the debentures.

Borrowings

• Based on the purpose and duration of the borrowings agricultural credits may be divided into
  • Short term credit: Loan for paying wages, hiring labour, purchasing feeds, seeds and fertilizers. They are payable out of the income of the next immediate harvest.
  • Medium term loan: Comparatively bigger loans required for the purchase of cattle, pump sets, implements etc., spanning 2-7 years for repayment. Repayment cannot be made at the next harvest.
  • Long term credit: Still larger sums to purchase land, wells, etc., It will take many years to repay.

Sources of Agriculture finance

• Finance for agriculture can be obtained from
  • Money lender
  • Credit co-operatives
  • Commercial banks
  • Government
  • Regional Rural Banks