Hi, welcome to this blog on the definition, characteristics and importance of capital in agriculture enterprise.
Table Of Contents
- Definition of capital in agriculture
- Features or characteristics of capital
- Types of capital in Agricultural Enterprise
- Importance of capital in agriculture Enterprise
Definition of Capital
Capital include all man-made productive assets which are used in production. In other words, these are assets made by man to enable him to produce goods and services.
Features or Characteristics of Capital
- Capital is also a factor of production
- Examples of capital are hoe, cutlass, tractor, farm building, cash in hand and plough.
- It can depreciate or appreciate.
- Sources of capital include personal savings, banks, government agencies and co-operative societies.
- The reward for capital is interest.
- It is a stock of assets used in production.
- It is used to purchase Farm inputs example; seeds, agro-chemicals or used as working capital.
- It is used to acquire other factors, e.g, land and labour.
- It is obtained in form of loans or subsidies.
- Capital is group into two classes, fixed capital and working or variable capital.
Types Of Capital
1. Fixed capital: These are capital or assets purchased for continuous use in production. In other words, these are items or materials which are not used up during production. Examples of fixed capital include; farm buildings, motor vehicles, plough, tractors, milking machines, feeders, drinkers, hoes, and irrigation equipment.
2. Walking or Variable capital: These are capital or assets which are used up during the process of production. Examples are; water, feeds, drugs, cash in hand, vaccines, litters, fertilizers, seeds and chemicals.
Importance of Capital in Agriculture Enterprise
- Working capital is used in day-to-day running of the farm Enterprise.
- Working capital is used for paying wages.
- Working capital is used for purchase of Farm inputs, maintenance service on the farm, and feeding of livestock, etc.
- Fixed capital in form of immovable houses and farmsteads provide shelter for farm operations.
- Fixed capital in form of machinery provides Farm power for farm operations. Visit here for sources of farm power
- Fixed capital is used to generate more funds and the success of Farm enterprise is usually depends on the maximum use of these capital assets.
- Working capital helps to facilitate Farm expansion or increase in Farm size.
- Capital is used to establish Farm enterprise.
Revision Questions
- Define capital in agricultural enterprise.
- What are the features or characteristics of capital in agriculture enterprise?
- List and explain the types of capital in agricultural enterprise.
- State the importance of capital in agriculture enterprise.