Department of Veterinary and Animal Husbandry Extension

Education

UNIT-7 (LIVESTOCK ENTREPRENEURSHIP)

Dr. Selvam S, Dr.Harshita Bhumra and Dr. Upendra Singh

ENTREPRENEUR
In Economics, output is considered to be created by the amalgamation of factors of
production such as Land, Labour, Capital and Organisation. For their contribution in the
production process, each factor is rewarded. Land is paid in terms of rent and labour is rewarded
with wage while capital is paid in terms of interest. Organisation/Entrepreneur, combines al these
factors judiously and also assumes risk and faces uncertainity in the production process and for
this activity they are paid in terms of profit.
An entrepreneur is a person who has possession of an enterprise or venture and accepts
significant accountability for the inherent risks and the outcome. The word “Entrepreneur” is
derived from the French verb entrepredre. It means to undertake. The term is used to refer to
anyone who undertakes the organization and management of an enterprise involving
independence and risk as well as the opportunity for profit. According to J.B.Say, “An
Entrepreneur is the economic agent who unites all means of production such as land, labour and
the capital, thus produces a product". Thus, entrepreneur in English is a term applied to the type
of personality who is willing to take upon herself or himself a new venture or enterprise and
accepts full responsibility for the outcome. Entrepreneurs identify the market opportunity and
exploit it by organizing their resources efficiently to accomplish an outcome which changes
existing interactions within a given sector. According to Joseph Schumepeter, “An Entrepreneur
in an advanced economy, is an individual who introduces something new in the economy a
method of production not yet tested by experience in the branch of manufacture concerned, a
product with which consumers are not yet familiar, a new source of raw material or of new
markets and the like”.
The functions of an entrepreneurship according to Schumepeter are
 Introduction of new product (Designer Egg,Crossbred cows, Hybrid fowls etc.,)
 Introduction of methods of production (Slated floor rearing of Goat,Integration in poultry
farming etc.,)

Page 1 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

 Developing new markets (Urban areas) and finding fresh source of raw materials (animal
waste recycling), andMaking changes.
 To conclude an entrepreneur is the person who bears risk, unites various factors of
production, to exploit the perceived opportunities in order to evoke demand, create wealth
and employment.

THE CONCEPT OF ENTREPRENEURSHIP

Entrepreneurship is a process of identifying opportunities in the market place, arranging

the resources required to pursue these opportunities and investing the resources judiciously to
exploit the opportunities for long term gains. It involves creating wealth by bringing together
resources in new ways to start and operate an enterprise.
According to Higgins “Entrepreneurship stood for the function of foreseeing investment
and production opportunities, raising capital, hiring labour, arranging the supply of raw
materials, finding site, introducing a new technique, discovering new resources or raw materials
and selecting top managers for day to day operations of the enterprise”.
To conclude, entrepreneurship is set of activities performed by the entrepreneur. Thus,
entrepreneur proceeds entrepreneurship.

QUALITIES OF AN ENTREPRENEUR
Some of the essential qualities of entrepreneurs are as follows

Success and Achievement: The entrepreneurs are self-determined to achieve high goals in
business, which strengthen them to overcome the obstacles, suppress anxieties, repair misfortune
and desire expedients, to run a successful business.
Integrity: Integrity and reliability are the glue and fiber that bind successful personal and
business relationships and make them endure.
Optimistic and confident :As Entrepreneurs, they often face obstacles and down periods and
during these difficulty days, their self-confidence and optimism only helps them to get out of the
crisis.

Page 2 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

Risk Taker: Entrepreneur accepts risk. They select a moderate risk situation, rather than
gambling or avoiding risk. They understand and manage risk willingly.
Energetic: The extraordinary workloads and the stressful demands entrepreneurs face place a
premium on energy. Many of them, fine-tune their energy levels by monitoring their diet,
following a fitness regime and knowing when to relax.
Opportunity Explorer:A common criterion among successful Entrepreneurs is their focus on
opportunity rather than on resources, structure or strategy Always entrepreneur identifies
opportunities. He seizes the opportunity with both hands and converts them into realistic
achievable goals. It may be in the form of new product, newer methods of production or
marketing strategies such as location.
Perseverance: Entrepreneur makes efforts and works hard till the goal is successfully
accomplished. They are undeterred by uncertainties, extreme risks and difficulties coming in the
way of achievement of final goal.
Facing Uncertainty: Achievement oriented people tend to successfully tackle an unfamiliar
situation. They go ahead with solutions for the problems even when the guidelines are not
available. It is more common in the case of entrepreneurs, since they try to do newer things.
Seek Feedback: Entrepreneurs are quick learners. Entrepreneur likes to have prompt and
immediate feedback of their performance to improve upon continuously so as to cater to the ever
changing consumers' lifestyle.
Independence: Entrepreneur likes to be their own master and wants to be responsible for their
own decision. An entrepreneur is a job giver and not a job seeker and don't want to follow others
or being dictated.
Flexibility: Entrepreneur makes decisions time to time based on the prevailing situations.
Successful entrepreneur does not hesitate in revising their decision. Entrepreneur is a person with
open mind, not a rigid person.
Planner: Entrepreneur frames realistic business plans and sets goals and follows them rigorously
to achieve the objectives in a stipulated time limit. They plan meticulously and execute it.
Though the plans seems to be out of the world, they have the vision and ability to achieve it.
Self Confidence: Entrepreneur directs his abilities towards the accomplishment of goals with the
help of his strengths.

Page 3 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

Motivator: A distinguishing character which separates entrepreneur from the rest of the flock is
his ability to motivate his workers. Entrepreneur influences and initiates people and makes them
think in his way and acts accordingly. They could improve the productivity of their employees
by their motivation.
Stress Taker: Entrepreneur as a focal point will make many right decisions which may involve
lot of physical and emotional stress. While decision making he keeps his cool even under tense
situations.
Self-starter: The ability to take the initiative, work independently and to develop own ideas.
Commitment - The willingness to make personal sacrifices through long hours and loss of leisure
time. More than any other factor, total dedication in the work is the unique quality of an
entrepreneur.
Ability to move - As an Entrepreneur, he should always move ahead as success comes with
overcoming setbacks.
Vision - Entrepreneurs know the path and direction they have to travel. They have clear vision of
what their farms can be and go after it.
Team work - Entrepreneurs always believe in team work and motivate it among the workers.

Page 4 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

DISTINCTION BETWEEN AN ENTREPRENEUR AND A MANAGER

Point of Distinction Entrepreneur A Manager
Goal Management An entrepreneur starts a venture The main aim of a manager is to
by setting up a new enterprise render his service in an enterprise
for his personal gratification. He already set up by someone, to
starts from the scrap and build it achieve the goal of the firm.He
brick by brick . merely run the business efficiently
which was built by some other
person.
Ownership Entrepreneur is the owner of A manager is the servant in the
enterprise. enterprise.
Risk Entrepreneur bears all risks and A manager being a servant does
uncertainty involved in the not bear any risk or uncertanity
enterprise. involved in the enterprise.
Rewards Entrepreneur, for his risk A manager receives salary as
bearing role, receives profits. It reward for service rendered which
may fetch him greater returns or is fixed at any particular period
may be irregular and can at and regular, but can never be
times be negative. negative.
Innovation As an innovator he is called as A manager executes the plans of
change agent who introduces the entrepreneur. Thus a manager
new or modified goods and translates others ideas into
services to meet changing needs practice.
of the customer.He plans,
envisages the changes and
implements them.

Page 5 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

TYPES OF ENTREPRENEUR

Clarence Danhof Classification: Clarence Danhof classifies entrepreneurs into four types.
 Innovative: Innovative entrepreneur is one who assembles and synthesizes information
and introduces new combinations of factors of production.
 Imitative: Imitative entrepreneur is also known as adoptive entrepreneur. He simply adopts
successful innovation introduced by other innovators.
 Fabian: The Fabian entrepreneur is timid and cautious. He imitates other innovations only
if he is certain that failure to do so may damage his business.
 Drone: His entrepreneurial activity may be restricted to just one or two innovations. He
refuses to adopt changes in production even at the risk of reduced returns.
Arthur H. Cole Classification: Arthur H. Cole classifies entrepreneurs as
 Empirical: He is an entrepreneur who hardly introduces anything revolutionary and
follows the principle of rule of thumb.
 Rational: The rational entrepreneur is well informed about the general economic
conditions and introduces changes which look more revolutionary.
 Cognitive: Cognitive entrepreneur is well informed, draws upon the advice and services of
expert‟s scheme of enterprise.
Classification on the Basis of Ownership
 Private: Private entrepreneur is motivated by profit and it would not enter those sectors of
the economy in which prospects of monetary rewards are not very bright.
 Public Entrepreneurship: In the undeveloped countries Government will take the initiative
to start an enterprise where capital requirements are very high and returns are less with
longer pay back period .
Classification Based on the Scale of Enterprise
 Small Scale: This classification is very popular in the developing countries. In India, small
scale enterprise is defined as an industrial undertaking in which the investment in fixed
assets in farm buildings/animals/plant and machinery does not exceed Rs. 10 million.
Investment limit in Farm buildings/animals/plantand machinery in respect of tiny
enterprises is Rs. 2.5 million irrespective of location of the unit. Small entrepreneurs do

Page 6 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

not possess the necessary talents and resources to imitate large scale production and
introduce revolutionary technological changes.(Broiler farms, Dairy farms etc., in India
are mainly on small scale).
 Large Scale: In the developed countries large scale enterprises are in greater numbers.
They possess the necessary financial and managerial capabilities to initiate and introduce
new technical changes. The result is that the developed countries are able to develop and
sustain a high level of technical progress.(Layer farms in India have now become large
scale investment).

Theories of entrepreneurship
Economic theory (mark Casson)
Demand for entrepreneurship arise from the need to change and the supply of entrepreneurship is
limited.
Four qualities of Entrepreneur
1. Judgmental decisions
2. Co-ordination of scarce resources
3. Motivated by self interest
4. Imagination-entirely innate.
Sociological Theory:
The anthropological model approaches the question of entrepreneurship by placing it within the
context of culture and examining how cultural forces, such as social attitudes, shape both the
perception of entrepreneurship and the behaviors of entrepreneurs.
Physiological Theory
Entrepreneurship gets a boost when society has sufficient supply of individuals with necessary
psychological characteristics
The psychological characteristics include need for high achievement, a vision or foresight, ability
to face opposition.
These characteristics are formed during the individual‟s upbringing which stress on standards of
excellence, self-reliance and low father dominance.

Page 7 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

Cultural theory of Entrepreneurship

It is based on assumption that every individual is endowed with social and cultural power which
helps to influence the stakeholders of their enterprise by instilling in their minds the importance
of culture with respect to business.
The culture theory provides a massive knowledge of some traditional and effective theories on
entrepreneurship.

FORMS OF ENTREPRENUER
Sole proprietorship
Sole proprietorship is the easiest, oldest, and most popular form of business to create. Sole
proprietorship usually involves one person owning and operating a business; the owner and
business is the same person. The owner is the only one responsible for the activities of the
business. This form of business is usually a service business that is handled and operated by one
person. Eg. Veterinary Consultants, Auditors.
The factors associated with the sole proprietorship, along with their advantages and
disadvantages, are as follows:
• Profits are taxed as income to the owner personally.
• Tax rate is lower than the corporate tax rate.
• Owner has complete control of the business.
• There is unlimited liability for company debts.
• Little reporting is required, and government regulation is minimal.
Normally, farmers are sole proprietors. They operate their farming businesses as the owner or
boss of the working operation. Any other business owner who operates under the status of “self-
employed” also falls within this category of sole proprietor, such as the local electrician,
plumber, and mechanic. Farmers do not have to apply for government certificates or status
because they are assuming full responsibility for the business. For tax and legal liability purpose,
the owner and the business are one and the same.
Partnership
Partnership involves two or more persons who unite in the operation and management of a
business venture. This type of partnership may be established for legal or tax purposes. The

Page 8 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

prospect of becoming a partner in a business can be an incentive to new employees. Most

effective partnership arrangements include professional service businesses, such as accounting
and law firms.
Some aspects associated with the partnership form of business are as follows:
 Business is subject to little government regulation.
 Business is relatively easier to establish.
 Formal partnership agreement is highly recommended to address possible conflicts
that could arise in future.
 Each partner is liable for all debts.
 All profits are taxed as income to the partners according to the percentage of
ownership.
 Business name must be registered with the Registrar of Companies.
 A clearly written agreement containing the partnership terms is essential.
 Have a clear and realistic agreement that anticipates future incidents.
 Include a buy-sell agreement in which terms are provided for the departure of one or
more partners from death, disability, retirement, or resignation.
 Consider carrying life insurance on each partner, so the partnership can pay the
remaining partner‟s estate for the value of his or her interest in the business.
Corporation
A corporation is a business that is chartered or registered by the state and that operates
separately from the owner or owners. It is legal entities comprised of persons who have obtained
a charter legally recognizing the corporation as a separate entity that has its own rights,
privileges, and liabilities that are separate from the individuals that form the corporation. The
Corporation can own assets, borrow money, and perform business functions without directly
involving the owners.
Limited Liability Corporations are the most recent form of business, combining the best of both
worlds (partnerships and corporations).
Advantages
• Limited liability of corporation members
• Not liable for company‟s debts

Page 9 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

• Tax advantages of a partnership

• Shareholders only taxed once
• Popular among professionals (doctors, lawyers, etc.)
• Owners risk only their investment
• Personal assets not at risk
Liability
• Most complex form of business corporation
• Comprised of three groups of people: shareholders, directors, officers
• Subject to more regulations than sole proprietorships and partnerships
• Earnings subject to double taxation (the corporation is taxed and shareholder
dividends are taxed)
• Not a total protection from lawsuits
The largest businesses in India, such as Venkateswara Hatcheries Ltd, Suguna Chicken,TCS
and Infosys are examples of Corporations. They encompass such a wide array of businesses and
involve so many investors and stockholders that their liability and security are ensured.
Co - operative
They are a form of Organization where people work together or business people on the
basis of mutual benefit. It is a voluntary Organization designated to promote economic
interests of its members. Members have equal right. The co-operative society has the motto
of “each for all and all for each”.

The Joint stock company

Some kinds of business could not be conducted on a small scale, and these have to start as joint
stock companies, either sponsored by some important interests or else developed as subsidiaries
of existing large firms. The advantages are limited liability, continuity, availability of capital
and ease of expansion. There will be a board consists of directors selected by all the members
(Shareholders).

Page 10 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

Private Limited Company

Private limited company is a one which has
• Has a minimum paid-up share capital of Rs.1 Lakh or such higher capital as may be
prescribed; and
• By its Articles of Association:
o Restricts the right of transfer of its share;
o Limits the number of its members to 50 which will not include:-
o Members who are employees of the company; and
o Members who are ex-employees of the company and were members while in such
employment and who have continued to be members after ceasing to be employees;
o Prohibits any invitation to the public to subscribe for any shares or debentures of the
company; and
o Prohibits any invitation or acceptance of deposits from persons other than its
members, directors or their relatives.
Public Limited Company
o The Company defined under section 3(1)(iv) of the Companies Act, 1956 is a public
company which-
o Is not a private company;
o Has a minimum paid-up capital of Rs. 5 lakhs or such higher capital as may be prescribed;
o Is a private company but subsidiary of a public company.

FINANCIAL ANALYSIS OF ACCOUNTS

Some of the financial statements useful to know the financial structure and position of
any livestock enterprise are
 Balance Sheet
 Profit and Loss statement
 Cash flow statement

Page 11 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

Balance Sheet
A balance sheet is a summary statement of all the assets and liabilities of a business at a
given point of time. To be precise, it is presenting the net value of assets and liabilities in a
concised form at a given time and is usually prepared towards the end of the financial year.
Balance sheet is also known as Net Worth statement. In a typical Balance sheet, the assets are
listed on the left hand side and liabilities are listed on the right hand side. Apart from this, at the
bottom of right hand side of balance sheet Net worth or Equity is mentioned. Generally the left
hand side values are equal or balances the right hand side values and hence this statement is
called as Balance sheet.
An Asset may be defined as a property which a farmer/firm owns.
A Liability is the amount of money to be paid by the farmer to the outsiders.

On the basis of liquidity assets/liabilities are classified into

Current assets: The assets which are used up in one production cycle and which can be easily
converted into cash.
Eg.: Cash on hand, accounts receivable, market securities, inventories etc.,
Medium term assets : The assets which are used up in production process for more than one year
and upto 5 years.
Eg. : Animals, equipments etc.,
Fixed assets: The assets which are used up in production process over a long period and which
cannot be easily converted into cash.
Eg.: Land, buildings, machinery etc.,
Current Liabilities: They refer to short time commitments of the business farmer which has to be
repaid within the current year.
Eg.: Accounts payable, taxes payable, interest payable.
Working/Medium term loans: They refer to commitments of the business farmer which could be
deferred at present but the due falls in the next season and their time period ranges from 1 – 5
years.
Eg. : Medium term loans, production loans etc.,
Deferred Liabilities :They refer to long term loans and other such commitments (5-15 years).

Page 12 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

Eg.: Long term loans for land .

Net Worth/Equity: It is the difference between the total assets and total liabilities in the
business.
The most liquid current asset is cash in hand and the least liquid current asset is inventory. The
most liquid current liability is money at call and the least liquid asset is long term loans.
Profit and Loss statement (Income Statement)
Profit and Loss statement is an important financial statement employed to assess the
performance of farm business. It shows the operational efficiency of the farm business in terms
of receipts, expenses, profits and losses. Generally it is prepared by the entire farm for one
agricultural year. However, it may also be prepared over a period of time. So, we can know the
trend in receipts and expenses which indicates the success or failure of a farm business. Thus it
contains basically three important items, namely., Receipts, Expenses and Net income.
Receipts: They include returns from all the enterprises in the farm. It also includes the
appreciation in the value of assets, gifts, many other types of receipts etc.,. However the returns
from the sale of capital assets such as land, buildings, machinery etc., are not counted as receipts.
Expenses: All the expenses and the variable inputs are taken as operational expenses which
includes the interests on working capital. The fixed expenses include, depreciation, interests on
fixed capital, rental value of owned land, land revenue etc.,. The amount spent on the purchase of
any capital asset does not come under expenses.

Net Income :It is calculated in three different ways.

a. Net Cash Income: This is worked out by reducing total cash expenses from the total cash
receipts.
b. Net Operating Income: It is calculated by reducing the total operational expenses from
the gross income.
c. Net Farm Income :It is worked out by deducting total fixed expenses from the net
operating income.
Of the three types of net incomes, net farm income is the best measure and is most
frequently used for assessing the performance of farm business.

Page 13 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

1. Operating ratio : Total operating expenses

Gross income

2. Fixed ratio : Total fixed expenses

Gross income

3. Gross Ratio / Input – Output ratio :Total Expenses

Gross income

Cash flow statement

This is also known as cash flow summary or cash flow budget or flow of funds statement.
Cash flow statement is a summary of cash inflows and cash outflows of a business organization
in a particular period, say a season or a year.
It is usually prepared for the future, hence the name cash flow budget.
The merit of this particular statement is that, it helps to assess the time at which the funds are
required for farming and other allied enterprises, sources from which these can be raised, the
purpose for which the loan is required, the need of sale and purchase of capital assets, the time
and quantum of repayment, etc.
Cash flow statement is prepared at the beginning of the agricultural year and checked every
quarterly.
For convenience, quarterly checks are made

Cash Receipts
Cash Balance, Total Operating Sales, Total Capital Sales, Non-farm income, Borrowings
Cash Expenses
Operating Expenses, Capital Investment, Family Living Expenses, Payment of Previous year‟s
Debts, Payment of Short-term Loans and Installments on Investment Loans
Cash Balance is the difference between Cash Receipts and Cash Expenses

Page 14 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

Advantages of Cash Flow Budget

It is a summary of all the financial matters of the farmer in a comprehensive report.
This helps
• to estimate the total credit needs (Short term, Medium term and Long term) of the farmer
along with time and quantum;
• to plan the repayment schedule,
• in making purchases and sales at the appropriate time thereby helping to minimize the
credit dependence, so that the farmers can keep limits to avoid wastages,
• to keep ready input requirements well in advance so that the last minute rush can be
avoided,
• to know the farm household‟s expenditure pattern and enable the farmer to exercise a
check on farm costs,
• the farmer in preparing the farm business plans for the ensuing years,
• the banker for revising the scale of finance, rescheduling loans, etc., and
• Finally, as a tool of financial control to the farmer.

Investment analysis (capital budgeting / project appraisal)

Generally in agricultural projects, the investments are made during different time periods
and the associated benefits were also spread overtime. These investments and returns are not
comparable as such with out adjusting for their time value. Thus the time value of money has to
be necessarily taken into reckoning in the investment analysis of agricultural projects.
The project appraisal techniques are broadly classified under two heads namely.,
 Undiscounted Measures
 Discounted Measures
Undiscounted Measures
They are the naïve (simple) methods of ranking agricultural projects. The three important
undiscounted measures are
a. Pay back period
b. Proceeds per rupee of outlay
c. Average annual proceeds of rupee outlay

Page 15 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

a. Pay Back Period

Pay back period is a simple technique of ranking projects based on the actual period of
time in which one can get back total investment.
I
P =
E
where, P is the pay back period
I is the total investment made in the project and
E is the net cash revenues / net revenues per annum.

b. Proceeds per rupee of outlay

Total Proceeds
Proceeds per rupee of outlay =
Total investment

c. Average annual proceeds of rupee outlay

This method is another method of choosing between the projects and measured by the
following formula
Total proceeds / life span of project
Average annual proceeds =
of rupee outlay Total investment

The projects are estimated by the magnitude of the estimate.

The major drawback of the undiscounted measures is that for the same data of the project,
we will get different rankings. Thus undiscounted measures are inconsistent and incompatible in
ranking.
Discounted Measures
Here the cash flows which are accrued in the project are discounted with an appropriate
discount rate. Generally the existing interest rate is taken as discount rate for this purpose. The

Page 16 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

discount rate cash flows are the best estimates to measure the worth of the projects. The three
important discount rate measures are
a. Net Present Worth (NPW)
b. Benefit Cost Ratio (BCR)
c. Internal rate of Returns (IRR)

a. Net Present Worth

The Net Present Worth which is also called as Net Present Value (NPV) is nothing but
the present value/worth of the cash flow stream in the project. The cash flow in the project is
the difference between cash inflow and cash outflow. The investments made in the projects are
generally called costs or cash outflows. The receipts that accrued during different time periods
are called as cash inflows or gross returns. The cash flows discounted with an appropriate
discount rate will give the net present worth of the project.
n n
NPW = ∑ Bt/ (1+r) - ∑ Ct / (1+r)t
t

t =1 t =1

Btis cash flows in tth year, Ct is cash outflows in tth year, t is 1 to 10 years that is life span
of the project.

The choice criterion using NPW is that the project with positive NPW is accepted for
implementation and the project with negative NPW is rejected. If the NPW is zero, the
entrepreneur is left in indifference. If he is to choose among different projects, the project with
highest NPW has to be chosen.
b. Benefit Cost Ratio (BCR)
BCR is worked out by dividing the present value of cash inflows by the present value of
cash outflows. If the BCR is more than one, that project is accepted and if BCR is less than one
the project is rejected. Among the different projects, the project with highest BCR is to be
selected.

Page 17 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

n Bt/(1+r)t
BCR = ∑
t =1 Ct/(1+r)t

c. Internal Rate of Returns (IRR):

It is the rate of return per rupee invested in an agricultural project over its life span. For
example if the IRR is 30 per cent in a livestock project, it means that this project gets an average
annual return of Rs. 30/ per Rs. 100/ invested in the project over its life span. It is the rate of
return at which the present value of total cash flows in a project is equal to zero. In other words,
it is the discount rate at which the NPW of the project is zero i.e.,

IRR = NPW = 0 or

n Pt
IRR = ∑
t=1 (1+r)t

Lower Difference Present worth of cash flow at lower discount rate

IRR = discount + in
rate discount rate Total of present worth of cash flow of both discount rates
(Ignore the signs)

Present worth =Future value/(1+r)t

Page 18 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

For a project to be viable it should have a BCR of one or greater than one at the
opportunity cost of capital and a NPW of zero or greater than zero at the opportunity cost of
capital and the discount rate for IRR should be greater than the opportunity cost of capital.

FINANCIAL RESOURCES MANAGEMENT

The financial resources are as important for the economic development of the country as
natural and human resources. It is of vital importance that the limited financial resources should
be utilized with utmost care and all wasteful expenditure be avoided. Financial management,
according to Hiwad and Uptron "involves the application of general management principles to a
particular financial operation."
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

1. Share Capital - A Company issues shares of its capital to raise the fund for its business. This
is done at the time of the company is incorporated and also subsequently as and when the need
arises.
There are two types of share capital
a) Preference capital b) 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.

Page 19 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

2. 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 too be borrowed from the
debenture holder. Rate of interest, date of issue and date of maturity are indicated on the
debentures.
3. Borrowings / Loans
Based on the purpose and duration of the borrowings agricultural credits may be
divided into
a) Short term credit- Loan for paying wages, hiring labour, purchasing seeds and
fertilizers. They are payable out of the income of the next immediate harvest
b) Medium term credit - Comparatively bigger loans required for the purchase of cattle,
pump sets, implements etc., spanning 2-3 years for repayment. It cannot be made at the next
harvest
c) Long term credit - Still larger sums to purchase land, wells, etc., It will take many
years to repay

Sources of Agriculture / Livestock finance

Finance for agriculture can be obtained from
 Money lender
 Credit co-operatives
 Commercial banks
 Government
 Regional Rural Banks
3 R’s of credit:
To estimate the rationality of a loan, it is essential to know credit analysis.
The considerations involved in credit analysis generally fall into three groups: returns,
repayment capacity and risk bearing ability. These are popularly known as the three R‟s of
credit.

Page 20 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

Returns
This R of credit has great significance for the creditor as well as the borrower. It
requires that both the borrower and the financier should be satisfied with the returns from
credit. The problem of determining the profitable use of capital is a part of decision making and
it involves selection of enterprises, determining the most economical production
techniques and determining the size of each enterprise.
Repayment capacity
It is the test of economic feasibility. It determines the amount the farmer will be able to
spare for repayment of loan. It is generally acceptable that if an investment is profitable, the loan
can be repaid without any difficulty.
Risk bearing ability
Risk bearing ability implies the capacity to cope with an unexpected low income and
unpredictable expenses and losses due to the vagaries of nature and other hazards such as
insects, pests, diseases and price fluctuations.

C’s of credit
They are character, capacity and capital. Character implies the borrower‟s moral
qualities, such as honesty, integrity and sense of responsibility which all influence the risk
bearing ability and repayment. Capacity signifies the borrower to repay the loan, when it is due
and depends upon his income. Capital reflects the net worth of the borrower (assets minus
liabilities) which also reflects his repayment and risk bearing ability.
Methods of repayment of loans - Four methods are commonly used.
 Straight end repayment or lump sum repayment: The entire loan is paid on the
expiry of the term but the interest on the loan is each year.
 Partial repayment or variable repayment: A part of the loan together with a part of the
interest on the loan is paid up every year.
 Amortized even repayment: An equal amount is repaid every year. This includes a
larger proportion of the principal and a smaller amount of interest in each succeeding
installment of payment. The method of payment is suitable when income is likely to
flow at a constant rate throughout the period.

Page 21 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

The annual instalment is arrived at through the formula given.

i
I = B ---------------
1-( 1+i)n

Where,
I = Annual instalment in Rs.
B = Principal amount borrowed in Rs.
n = Loan period in year.
i = Annual interest rate in fraction.

 Amortized decreasing repayment: The amount of the principal remains constant and the
share of interest declines with every installment of repayment. Thus, the annual payment
becomes smaller every succeeding year.

Page 22 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

LIVESTOCK BUSINESS
During the past two decades, the traditional livestock farming has undergone
overwhelming changes and emerged as livestock business sector that have influenced upon every
phase of the industry. Some of the changes are: the liberalization of the global market, changing
technological and regulatory settings, international competition, modern processing and pickier
consumer. Livestock production also is changing from family based, small scale, and relatively
independent firms to large firms that are more tightly designed across the production and
distribution value chains. In addition to this, there has been a marked change in make-up of
inputs used in livestock, concentration and vertical integration and effective utilization of new
production, processing and distribution, and information technologies. Livestock rearing has
evolved into livestock business and has become a vast and complex system that reaches far
beyond the farm gate to include those who are involved in bringing food to consumers. Livestock
business not only includes farming (those who hold livestock and poultry), but also the people
and firms that provide inputs, process the outputs, manufacture the livestock food products, and
transport and sell the food products to consumers.
Scope for livestock business
 The livestock wealth gives enormous scope for production of meat, milk and milk
products, poultry products etc.,
 There is growing demand for livestock inputs such as feed, fodder, machineries and
equipments. Export can be harnessed as a source of economic growth. As a signatory of
World Trade Organization, India has vast potential to improve its present condition in the
world trade of livestock commodities both in raw and processed forms. The product line
includes meat, milk and milk products, fish and fish products, etc.,
 At present processing is done at primary level only and the rising standard of living
expands opportunities for secondary and tertiary processing of livestock commodities.
 The enhanced livestock production throws open opportunities for employment in
marketing, transport, cold storage and ware housing facilities, credit, insurance and
logistic support services.

Page 23 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

Examples for various livestock / poultry business

Farming Processing Trading Associated activities
Dairy, Sheep, Milk processing, Meat Wholesaling Feed industry
Goat, Poultry, Processing, By products Retailing, Pharmaceuticals
Swine, etc. processing, Integration,etc. Farm equipments
Leather processing, etc. industries, etc.

INSTITUTIONS PROMOTING ENTREPRENEURSHIP IN INDIA

• National Institute for Entrepreneurship and Small Business Development (NIESBUD)

• Entrepreneurship Development Institute of India
• Indian Institute of Entrepreneurship
• Ministry of Small Scale Industries
• Small Industries Development Organisation (SIDO)
• The National Small Industries Corporation Limited (NSIC)
• National Institute for Small Industry Extension Training (NISIET)
• Small Industries Development Bank of India (SIDBI)
• The Khadi and Village Industries Commission (KVIC)

The National Institute for Entrepreneurship and Small Business Development

(NIESBUD) is an apex organisation under the Ministry of Skill Development
and Entrepreneurship, Government of India engaged in Training, Consultancy, Research and
Publication, in order to promote entrepreneurship.
The Core Objectives of the Institute are as follows: To standardize and systemize the
processes of selection, training, support and sustenance of potential and existing entrepreneurs.
To support and motivate institutions/organizations in development related activities.
Entrepreneurial skills training provides the basics of starting and operating a small
business. Entrepreneurship education programs often guide youth through the development of a
business plan and also may include simulations of business start-up and operation.

Page 24 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

ENTREPRENEURSHIP DEVELOPMENT PROGRAMMES

These are done on-campus in Delhi or off campus in different locations. These are of two
types

 Target specific such as

• General
• Women
• Science & Technology Graduates
• School Leavers
• SC/OBC
• Ex-Servicemen (Veterans)
• Self-Employment (SEEUY, TRYSEM, PMRY etc.)

 Product/Process Oriented
• Leather
• Builders Hardware
• Food
• Plastics
• Chemicals
• Sports Goods
• Readymade Garments
• Electronics
• Information Technology etc

Page 25 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

ACCOUNTING
Definition
Accounting may be defined as the process of recording, classifying, summarizing,
analyzing and interpreting the financial transactions and communicating the results thereof to the
persons interested in such information.
An analysis of the definition brings out the following functions of accounting.
Recording
This is the basic function of accounting. It is essentially concerned with ensuring that
all business transactions of financial character are recorded in an orderly manner.
Recording is done in the book journal.
Classifying
It is concerned with the systematic analysis of the recorded Data, with a view to
group transactions or entries of one nature at one place. The work of classification is done
in the book termed as ledger.
Summarizing
This involves presenting the classified data in a manner, which is understandable and
useful to the internal as well as external end users of accounting statements. This process
leads to the preparation of following statements:
i) Trial balance, ii) Income statement & iii) Balance sheet.

Deals with financial transactions

Accounting records only those transactions and events in terms of money which are of
a financial character. Transactions which are not of a financial character are not recorded in
the books of account.
Analysis and Interprets
This is the final function of accounting. The recorded financial data are analyzed and
interpreted in a manner that the end users can make a meaningful judgment about the
financial condition and profitability of the business operations.
Communications

Page 26 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

The accounting information after being meaningfully analysed and interpreted has to be
communicated in a proper form and manner to the proper person. This is done through
preparation and distribution of accounting reports.

OBJECTIVES
The following are the main objectives of Accounting
To keep systematic records
Accounting is done to keep a systematic record of financial transactions.
To protect business properties
Accounting provides protection to business properties from unjustified and unwarranted
use.
To ascertain the operational profit or loss
Accounting helps in ascertaining the net profit earned or loss suffered on account of
carrying the business. This is done by keeping a proper record of revenues and expenses of a
particular period. The profit and loss account is prepared at the end of a period and if the amount
of revenue for the period is more than the expenses incurred in earning that revenue, there is said
to be a profit. In case the expenditure exceeds the revenue, there is said to be a loss.
Profit and loss account will help the management investors, creditors, etc. in knowing
whether running the business is remunerative or not.
To ascertain the financial position of business
The profit and loss account gives the amount of profit or loss made by the business
during a particular period. However it is not enough. The businessman must know about his
financial position i.e, where he stands: what he owes and what he owns? This objective is served
by the Balance sheet or position statement. The Balance sheet is a statement of assets and
liabilties of the business on a particular date.
To facilitate rational decision making
Accounting these days has taken upon itself the task of collection, analysis and
reporting of information at the required points of time to the required levels of the authority in
order to facilitate rational decision making. The American Accounting Association has defined

Page 27 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

accounting as the process of identifying, measuring and communicating economic information

to permit informed judgements and decisions by users of the information.
Financial accounting
The art of recording, classifying and summarizing in a significant manner and in terms of
money, transactions and events which are atleast in part of a financial character and interpreting
the results.
Management accounting
The presenting of accounting information in such a way as to assist management in the
creation of the policy and in the day to day operation of undertaking.

SYSTEMS OF BOOK KEEPING

Book keeping is the art of recording pecuniary or business transactions in a regular and
systematic manner. Book-keeping is the art of applying the principles of the science of
Accountancy in the keeping of books of account. From properly kept books a person can at any
time ascertain
i. what property he possesses
ii. what amounts are owing to him and by whom
iii. what amounts he owes and to whom
iv. what profit he has made or what loss he has unstained for any given period and the
manner in which the profit or loss has arisen and
v. the amount of his capital or deficiency.
Single Entry System
An incomplete double entry can be termed as a single entry system. It is a system of book
keeping in which only records of cash and personal accounts are maintained, it is always
incomplete double entry, varying with circumstances. This system has been developed by some
business houses, who keep only essential records. Since all records are not kept, the system is
not reliable and can be used only by small business firms.
Double Entry System
This system is believed to have originated with the Venetian merchants of fifteenth
century and it is the only system of recording the two – fold aspect of the transaction. The

Page 28 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

system recognizes that every transaction have a two – fold effect. If someone receives something
then either some other person must have given it, or the first mentioned person must
have lost something, or some service etc. must have been rendered by him.
Every transaction involving money or money‟s worth has a two fold aspect, the receiving
of a value on the one hand and the giving of the same value on the other. This two fold nature in
all transactions must be recorded in the books and this gives rise to the term “Double entry
Book-keeping”.
In order that the two fold aspect of every transaction may be recorded, a ledger account
(A/c.) is assumed to be capable of receiving and giving. Thus a ledger account has two sides, one
side for recording values received and the other for recording values given. The left hand side is
for values received and is called the debit (Dr.) side. The right hand side is for values given and
is called the credit (Cr.) side.
To debit (Dr.) an account is to enter an amount on the debit side – this is termed a debit
entry.
To credit (Cr.) an account is to enter an amount on the credit side – this is termed a credit
entry.
Every transaction affects two ledger accounts. If one account is to be debited with an
amount, another account must be credited with the same amount. If one account receives,
another account must give.
Every debit entry must have a corresponding credit entry.
Every credit entry must have a corresponding debit entry.
Every debit entry is preceded by the word “To” and every credit entry is preceded by the
word “By”.
The double entry system may be summarized as:
“For every debit there must be equivalent Credit and vice versa”.

Page 29 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

Accounting Equation
The system of double entry system of book keeping is very well explained by the
Accounting Equation given below.
Assets = Equities
The properties owned by business are called „Assets‟. The rights to the properties
are called „Equities.
Equities can be sub divided into two principal types, the right of creditors and the
rights of the owners. The equity of the creditors represents debts of the business and are called
liabilities. The equity of the owners is called capital or proprietorship or owner‟s equity.
Thus,
Assets = Liabilities + Capital.
Assets - Liabilities = Capital.

Original Records
It records all daily transactions of a business into the order in which they occur and is
also called as Journal. Journal is defined as a book containing a chronological record of
transactions. It is the book in which transactions are recorded under the double entry system.
Thus journal is the books of original records. The process of recording transaction in a journal is
termed as Journalizing.
Proforma of Journal
Date Particulars L.F Debit Rs Credit Rs
(1) (2) (3) (4) (5)

Date: The date on which the transaction was done is recorded here.
Particulars: The two aspects of transaction namely debit and credit are recorded here.
L.F: It is Ledger Folio. The transactions entered in the journal are later on posted to the ledger.
Debit: The amount to be debited is entered.
Credit: The amount to be credited is shown.

Page 30 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

Closing of accounts (Closing entries)

Closing Entries are entries passed at the end of the accounting year to close different
accounts. These entries are passed to close the accounts relating to incomes, expenses, gains and
losses. In other words, these entries are passed to close the different accounts pertaining to
Trading and Profit and Loss account. The accounts relating to assets and liabilities are not closed
but they are carried forward to next year.
The principle of passing a closing entry is very simple. In case an account shows a debit
balance, it has to be credited in order to close it. For e.g. if the purchases account is to be
closed, the purchases account will have to be credited so that it may be closed because it has a
debit balance. The closing entries are passed in the journal proper.

Rules for Debit and Credit

The transactions in the journal are recorded on the basis of the rules of debit and credit.
For this purpose, business transactions have been classified into three categories:
(i) Transactions relating to persons – Personal Accounts
(ii) Transactions relating to properties and assets – Real Accounts
(iii) Transactions relating to incomes and expenses – Nominal Accounts.

ACCOUNTS
Personal Real Nominal
1. Natural 1. Tangible 1. Expenses and Losses
2. Artificial 2. Intangible 2. Incomes and Gains
3. Representative

Personal Accounts
It includes the accounts of persons with whom the business deals. There are three
categories in this.
Natural Personal Accounts
The term „Natural Persons‟ means persons who are creation of GOD.For e.g. Parvathi‟s
account, Arya‟s account.

Page 31 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

Artificial Personal Accounts

These accounts include account of Corporate bodies or Institutions which are recognized
as persons in business dealings. E.g. The account of a club, the account of government, the
account of an insurance company etc.
Eg.Account of LIC.
Representative Personal Accounts
These are accounts which represent a certain person or group of persons. E.g. For salaries
due to the employees (not paid), an outstanding salaries account will be opened. This outstanding
salaries account represents the accounts of the persons to whom the salaries have to be paid.
The rule is
DEBIT – THE RECEIVER ; CREDIT – THE GIVER
Example: Krishna is giving cash to Rama.
Then the account of Krishna will have to be credited and Rama‟s account will have to be
debited.
Real accounts
Tangible real accounts
Those accounts which relate to such things which can be touched, felt, measured etc.
Example: Cash account, Building account, Furniture account, Stock account etc.

Intangible real accounts

These accounts represent such things which cannot be touched, though they can be
measured in terms of money. Example: Patient‟s account.
The rule is
DEBIT – WHAT COMES IN ? ; CREDIT – WHAT GOES OUT ?
Example: When furniture is purchased for cash, furniture account should be debited while the
cash account should be credited.

Nominal accounts
These accounts are opened in the books to simply explain the nature of transactions. They
do not really exist. For e.g.in a business, salary is paid to the manager, rent is paid to the

Page 32 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

landlord, while salary, rent as such do not exist. The accounts of these items are opened simply
to explain how the cash has been spent. In the absence of such information, it may be difficult for
the person concerned to explain how the cash was utilised.
Nominal accounts include accounts of all expenses, losses, incomes and gains. The
examples of such accounts are rent, insurance, dividends, loss by fire etc.
The rule is
DEBIT - ALL EXPENSES AND LOSSES ; CREDIT – ALL GAINS AND INCOMES

Page 33 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

PERSONNEL MANAGEMENT

Management of human resources

Management of human resources is of vital importance for every country and
organization, A pertinent question which deserves our consideration is as to what is the process
of management of human resources? This process comprises of four items i.e., acquisition
(getting the people), development (preparing the people), motivation (activating the people) and
maintenance (keeping them).
Definition
Personnel management is the sub area of the general management and is concerned
primarily with manpower resource. "Personnel management is the planning, organizing,
directing and controlling of procurement, development, compensation, integration and
maintenance of people for the purpose of contributing to Organization, individual and social
goals."
Functions of the Personnel Management
The personnel manager has to perform the managerial functions such as planning,
organizing, directing, motivating and controlling personnel working in his department. In
addition to these managerial functions, he has to perform the following operative functions also.
1. Procurement - recruitment, selection, placement and induction of the new employees
2. Development - performance appraisal, promotion, transfer of employees
3. Compensation - remuneration in the form of wages, salaries, bonus
4. Integration - integrating the organizational, social and individual goals
5. Maintenance – health, safety and favourable work environment, employee benefits
and services, labour welfare work, worker participation in management.

Work analysis
Every work of which ever type it may be , to which ever category it may belong is
characterized by certain inherent criteria known as work specifications. The procedure for
securing, organizing and combining the important facts related to work, enables the personnel
department to assess the quality and characteristics of the operator in performing the same, is

Page 34 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

regarded as an essential basis of work analysis. The man entrusted with this work is popularly
known as „Work Analyst‟.
Work Study
Work-study can conveniently be defined as the tool of the management for achieving
higher productive efficiency in the Organization. Work-study can be broadly classified into
Methods study and Work measurement
a) Methods Study
This can be defined as the systematic procedure for analyzing the existing methods of
doing work including the various human movements involved in it with the main objective of
evolving the best or the most economical methods of doing the work. The procedure adopted can
be categorized stage by stage as follows:
 Selection of the work to be studied
 Collection of data and recording of the relevant facts about the existing methods
 Critical examination of the data collected
 Development of most practical, economic and effective method, having due regard to all
contingent circumstances.
 Installation of the new methods and maintaining it by regular routine check.
Techniques followed in Methods Study
 Operation Process Chart - graphical representation by linear diagrams
 Flow Process Chart - shows in addition to above the transportation required, distance
traveled, storage and delays.
 Flow Diagram - same as above but here symbols are used
 String Diagram - using string and pins on the template models
 Multiple Activity Charts - also known as SIMO chart (simultaneous motion chart)

b) Work Measurement
This is the technique of assessing the time content of the work performed by an operator.
The technique involves the determination of the proper time required for the work and so
popularly known as time study.

Page 35 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

OPTIMIZATION OF LABOUR INPUT

Optimization of labour in the actual sense means to obtain the most efficient or optimum
use of labour. Labour must be confined with the other factors of production and cannot be
discussed in isolation. Proper labour management policy will depend on particular farming
situation.
According to Alfred Marshall "Labour is any exertion of mind or body undergone partly
or wholly with a view to earning some good or other than pleasure derived directly from work”.

Characteristics of labour
 Not a commodity
 Inseparable from the labourer
 More perishable than any other commodity
 Less mobile
 Supply of labour is independent of its demand
 It is difficult to calculate the cost of production of labour
 Labourer sells his service and not himself
 Labourer does not have same bargaining power as their employers
 Labourer is not a machine - have ones own liking , feelings , wishes, thoughts etc.,
 Labourers differ in efficiency

Types of Labour
1. Hired/Casual - Seasonal
- For special jobs
2. Temporary - Skilled
- Unskilled
3. Permanent - Skilled (eg. Milkers, Clerks)
- Unskilled (eg. Workers, Attendants)

Page 36 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

DIVISION OF LABOUR
Division of labour means dividing large tasks into smaller packages of work to be
distributed among several people. This work specialization allows an employee to master a task
in the shortest time with a minimum skill.
Making of an article is split up into several processes and each process is entrusted to a
separate set of workers. This is known as division of labour. It is simply a form of
specialization of labour. There are 3 types of division of labour. They are,

a) Simple division of labour

A work is done by the combined efforts of a group of workers. It is difficult to say how
much work each one did. Ex. Carrying a heavy almirah lead by a number of people.
b) Complex division of labour
The work is split up into different processes and each worker is assigned a definite part of
the work. This is the division of labour proper. Ex. Manufacturing of pins, making of bread etc.,
c) Territorial division of labour
This firm refers to certain localities or cities or towns specializing in the production of
some commodities. Eg. Lock -making in Dindigul and match factories in Sivakasi.

ADVANTAGES OF DIVISION OF LABOUR

Advantages to the producer
1. Increase in mechanization
2. Increase in production
3. Increase in inventions
4. Reduction in production cost
5. Economic use of machinery
6. Savings of time
7. Advantages of specialization
Advantages to the workers
1. Reduction in training period
2. Allocation of work according to ability
3. Increase in workers efficiency
4. Increase in mobility of labour
5. Organization of workers

Page 37 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

DISADVANTAGES OF DIVISION OF LABOUR

Disadvantages to the worker
1. Monotony of work
2. Narrow outlook of workers
3. Decline in mobility of labour
4. Sense of irresponsibility
Disadvantages to the society
1. Exploitation of women and children
2. Physical and moral deterioration of workers
3. Struggle between workers and employers
4. Danger of overproduction

JOB SPECIALISATION
The word specialization is frequently used with the division of labour and essentially
both means the same. Both mean that each unit of the productive input - each person, each piece
of land, each machine - does only a part of the total production job.
Merits of Job Specialization
 Employing high grade and experienced men for more specialized work is economical in the
long run.
 Lightens the workload on each labourer - making him more physically and mentally
acquainted with the job.
 Make the worker to be more skilled and increase his efficiency in the job he does.
 Streamlining the capital investment in labour by actually knowing the skill and
specialization of the worker.
 Management is easier, so also the supervision.
 Increase the production is probably the most important advantage.
 Time saving
 Doing the work more times make the worker to know the minutest detail which may instill
new ideas for the modification of the product or the process.
 Helps to find out the job of ones taste
 Possibility of employing the right man at the right place.
 Maximum exploitation of the skill is possible, enabling to produce good quality
products/services.

Page 38 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

Demerits of Job Specialization

 Risk of unemployment
 Monotony of the work
 Monopoly of the power
 Brings stratification in the society, creating inequality among the individuals
 Profit is stipulated as one is concentrating on one product.

Page 39 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

ORGANIZATIONAL ASPECTS OF LIVESTOCK FARM

Management is one of the important factors of production concerned with decision-

making and risk bearing. It coordinates the other three resources namely land, labour and capital
in a production process. The major objective of farm management is to organize and operate a
farm so that it is conducted with efficiency and continuous profit.
Broadly speaking, management performs the following functions
 Making decisions
 Carryout the decisions and
 Assuming risks and financial responsibilities
Organising the farm for Profitable production
The task of organising a farm for profitable production needs lot of thinking and
planning, since farming is a complex business. The farm manager is faced with the questions of
how much area to be used for each crop, how many cattle head are to be maintained, how to
coordinate cropping-livestock programmes with all the resources of the farm, how to use the
low-cost method of production and finally how to make a budget which gives greatest profit on
the farm as a complete unit. Farm management principles help the farm manager to be orderly in
his thinking and a clear-cut idea of how to organise the farm on a sound footing.
Practical steps to organise a farm
Step by step procedure to organise the farm, so that the maximum profit may be obtained
on the complete farm unit is as follows
 Make an inventory of farm resources (Building, Equipment, Livestock, etc.)
 After making survey of the farm, draw a Map of the farm
 Record the previous history (Previous crops grown/ livestock kept, etc.)
 Set down the cropping/ livestock scheme based on soil type, labour use, etc.
 Calculate the labour requirement for each month/ enterprise
 Adjusting the number of livestock according to the crop cultivated
 Prepare Income and Expenditure statement
 Prepare good Marketing Programme for locating best marketing channel
 Maintain farm records as a part of organising farm efficiency

Page 40 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

Types of Farming
Based on land utilization and farming practices followed, the types of farming are as
follows
 Diversified Farming - Many enterprises (Livestock, Fruit crop, Poultry, etc.)
 Specialised Farming - Main enterprise (Dairy farming or Sheep farming etc.)
 Mixed Farming (Crop + Livestock enterprise)
 Irrigated or Dry Farming - When rainfall is less than 50 cm.
 Ranching - Land is not tilled.
System of Farming
Based on type of ownership to land and methods of agriculture used in operating the
land, the system of farming is given as follows
1. Peasant Farming
2. Co-operative Farming
3. State Farming
4. Capitalistic Farming and
5. Collective Farming

A. FARM RECORDS

Physical Financial Supplementary

- Farm map - Farm inventory record -Rainfall register
- Labour record - Farm financial register -Hire register
- Feed record - Purchase register -Stationary register,etc.
- Machinery use register, etc. - Wage register, etc.

Page 41 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

B. CREDIT SUPPLY TO FARM

Loans from Banks Private lending agencies

- Short-term loan
- Medium-term loan
- Long-term loan

C. FARM EFFICIENCY MEASURES

Physical efficiency measures Financial efficiency measures

Aggregate measures Aggregate measures

- Total production, -Gross income
- Number of Livestock, etc. -Gross profit
-Net worth, etc.

Ratio measures Ratio measures

-Land use efficiency - Cost ratio
-Labour efficiency - Capital ratio
-Machinery efficiency, etc. - Income ratio, etc.

Thus the farm management covers all aspects of farming, which have a bearing on the
economic efficiency of the farm.

Page 42 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

Tools of Management
Individual decision is a highly complex and personal process for a commercial farmer,
especially in a changing and a highly technical environment. The following tools or aids are
available to improve the decision making process.
 Economic principles constitute an important tool to be used in deductive reasoning and
they tell us what type of information we need to collect and study?.
 Historical information on the internal operation of a farm-business is a valuable source
of information for decision making.
 The farm - budget and farm stimulation procedures have proved to be useful in making
farm management decisions.
 These tools are helpful to the farmers in analysing the problem situation and estimating
the consequences of alternative lines of action.

FARM BUDGETS
Complete Budgeting
It refers to estimation of returns for the entire farm business. For example, if a farm has
crops, dairy, poultry and fishery, the statement showing the estimated returns and expenses of all
those enterprises together with a complete budget.
Complete budget is required when a farm plan is prepared for a new farm or when a
drastic change is suggested in the plan of existing pattern of an established farm.
Partial Budgeting
If a separate estimate of the returns and expenses for each enterprise in the farm is made,
it is called a partial budgeting. For instance the budget for the poultry unit alone or only the dairy
or for a particular crop will be a partial budget.
Partial budgets are commonly used to estimate the effects or outcomes of possible
adjustments in the farm business before such adjustments are actually made.

Page 43 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

Farm Records
Farm Records are also useful in making farm management decisions. Enterprise record
system hich include farm income statement, listing of receipts and expenses by enterprise, listing
of account payable and receivable, a depreciation schedule, inventories and a pay roll record is
very helpful as a tool in farm management. A cash flow statement with monthly deficit or
surplus, necessary borrowing, debt payments and end-of-period balance, trends in the price level
and price relationships are also important in long - run decisions. The consequences of inflation,
deflation and price stability can also be budgeted.
In recent years, computer has become a new management resource. Record keeping
activities of the manager can be substituted and efficiency/accuracy of budgeting can be
increased by using the computers.

Risk and Uncertainty

Often there are situations of risk and uncertainty in farm management and some of them
can be covered by insurance. Asset position of the farm, use of commodity contributing,
diversification in livestock practices are useful to some extent in overcoming risks and
uncertainty.
For a scientific and irrational formulation of ideas, all the above desired tools of
management are proved to be useful in the farming sector.

RESOURCE MANAGEMENT
One of the major objectives of the changing modern trend in any developing country is
promotion of the welfare of the people. For the attainment of this objective, high priority is given
on economic development, which in turn depends on human, natural and financial resources.
Since, in most of the developing countries these resources are not available in abundance,
utmost care should be taken to make proper use of these resources to obtain best possible results.
Hence, the management of various types of resources assumes special importance in the
developing countries.

Page 44 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

Management of natural or material resources

The material or the natural resources also play an important role in the economic
development of a country. Effective management of natural or material resources is of prime
importance.
a) Sources and procurement of materials
Purchasing procedures of materials include various stages: First, the need are to be
ascertained and recognized. Accurate statement of character and quantity of material needed with
full descript is to be prepared. Purchase requisitions and negotiations with possible sources of
supplies are to be made. This is important in the business as it is more concerned with the
economy of the company or the firm.
b) Requirement of materials
Type of the material to be used in the production process is generally determined by the
production department (engineering dept.) of the company, as it has necessary knowledge and
equipment to check the real physical characteristics.
c) Buying / making
Usually this is done by the top management. It depends how highly integrated and the
diversified the company is.

Advantages of making
Delivery on time in right quantity and quality
Cost consideration less inventory
Emergency
Advantges of buying
Less investment in machines and equipment
Simpler to manage in smaller and less diversified companies.

d) Source selection
The procedure involved in the source selection is the preparation of an exhaustive list of
suppliers and then sorting them out the one or ones with whom to do the business.

Page 45 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

BREAK EVEN ANALYSIS

In any business, there is a point where total costs become equal to total revenues and
that point is called as Break Even point and the corresponding output is known as Break
Even output (BEO). This means that at this point, the business is making no profit/no loss.
Break even point is the minimum point of average total cost. A farmer must produce atleast
this amount of product to cover the total cost of production. Whatever is produced above this
point will be the profit for the farmer. The point where the farmer recoups his investment is
the Break even point. The investment is in the form of fixed cost and variable cost which
constitutes the total cost. When the total cost is equal to total revenue it is Break even point.
It can be calculated by,

The Break even point nearer to the origin indicates less loss and more profit zones. The
Break even point away and away from the origin indicates more and more loss zone and less and
less profit zone. Nearness of Break even point to the origin also indicates whatever the farmer is
producing is market worthwhile. Due to this the farmer will recoup his investment even by
producing less number of units of output.
The Break even point away from the origin indicates to recoup the investment the
farmer has to produce larger number of units of output which is an indication that whatever the
farmer is producing is not so market worthwhile.
There are two approaches namely.,
Linear and Curvilinear approach
Linear Approach: Here the sale price of output remains constant for all the output sales. Here the
total cost curve and the total revenue curve are linear that is these two curves are straight lines,
where the total revenue curve cuts the total cost curve in the Break even point and the
corresponding output is known as Break even output .

Page 46 of 47
 Department of Veterinary and Animal Husbandry Extension
Education

Total Fixed Cost

Break even point =
(Output in units) (Selling price/unit of output) – (Variable cost/unit of output)

Total Fixed Cost

Break even point =
(Amount in Rs.) Variable cost/unit of output
1-
Selling price/unit of output

Margin of safety
The margin of safety of a farmer is the difference between its normal capacity and break
even output. Margin of safety indicates the shock absorbing capacity of the farmer in times of
risk and uncertainty. In other words it reflects the financial strength of the enterprise.
Margin of safety = Normal capacity – Break even output
Margin of safety in monetary terms = Revenue of the – Revenues from Break
total output even output
Curvilinear approach: Here the total revenue changes over the period of time, since the some
price changes, one output sales to the other. Generally the curvilinear approach is used for
perennial crops and also in business where the gestation period is very long.

Shut down point

Shut down point is the minimum point of average variable cost. A farmer must produce atleast
this amount so that he will be able to cover the variable cost of production. If the total revenue
curve goes below this point, it is better to close the business instead of incurring losses. So this
point is called as Shut down point.

Page 47 of 47