CC BY
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Bozena Wojtyra, Marek Balcerak ©
Warsaw Agricultural University
CASH FLOWS IN FARMS WITH DIFFERENT ANIMAL PRODUCTION
Abstract
Study presents sources of origin and spending directions of financial means and the showing periods of greatest demand for financial means in farms with different directions of production. Financial flows were divided into operating, investment, financial and private activity. Income was lower in the first quarter of a year and considerable higher in the fourth quarter. Financial means supplied the greatest demand in November and December.
Key words: farms, monetary income, expenses of financial means, operational activity, financial activity, investment activity
Introduction
In company balance we have cash level at the beginning and at the end of the reporting period, and the report of financial flows explains why changes in cash occurred (Rice, 1993). The cash flow statement demonstrates changes in the state of financial means, with pointing at sources of increase and reduction and directions of exploitation. It is possible to quickly see, where from financial means got down and what were used to. Cash flows as the surplus of influence over expenses, depict the step internal self-financing.
At application of cash flow calculation, individual positions are being grouped according to two criteria: origins of financial means, directions of using financial means.
From future financial situation point of view, not only an expression of surplus from operational activity is essential, but also from events appearing outside the company. The operating surplus of financial means serves for the assessment of profitability of the company. The following aims are being assigned to the surplus of financial means: getting better characteristics than in balance and income statement of present and future profitability, illustrates more effectively than financial result the current financial surplus, calculation financial surplus for establishing the internal degree of self finance, of current pay ability.
In contrast with the balance sheet profit the surplus of financial means is less susceptible to manipulations of the result of business activity. It doesn't constitute the base for assuming it as a profit.
The assessment of the surplus of financial means as the instrument requires answering two main questions: - whether the surplus is positive or negative base for positive or negative assessment of the ability to pay, - whether the surplus of financial means is an essential data entry in decision-making processes, and if so it in which?
According to Wyszkowska (1996), the size of the surplus isn't an sufficient indicator of the ability to pay.
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Task
The aim of the article was to make an appraisal of sources of the origin and sizes of farms get by groups of financial means, using them by directions, as well as pointing of periods of the greatest demand for financial means in farms about different directions of the production.
Materials and methods
Presented results are actual data. In this work a numerical material gathered for three following calendar from 264 farms who were grouped according to production direction. In sorting farms according to production directions, behind the essential criterion a participation of value of the production of individual branches in the final production was adopted. At determining the participation in the final production of a farm some products were being linked into groups, on account of connections in the process of producing (e.g. the milk and milk preserves) or similar technology of their production - cereals. Ranking of farms, was established by methods according to Wojtaszek (1965). In farms with one-way specialization the interest-bearing share of the main branch predominated or he was above 40% and around every remaining after fewer than 30% (Manteuffel, 1978).
In specialized farms were: poultry breeder's (48), dairy (74), gardening (20), pig (84), cereal (38).
Presented results characterize farms led by young farmers who are invest, so they have greatest chances for development. According to Klepacki (2003) it concerns those who mostly influence the image of polish farming in the future.
Financial flows gathered in three consecutive years were presented in the division into operating, investment, financial and private activity. Juxtaposing annual amounts of payments with payments of allocating on individual directions an annual balance of the cash flow was calculated.
Results of researches
Table 1 shows a balance of flows in the poultry, dairy, gardening, pork and cereal. Given balance amounts from operational, investment and financial activity mean the surplus from a farm (net flow).
Table 1
Balance of flows in the poultry, dairy, gardening, pork ant cereal pln.
1 year 2 year 3 year
poultry breeder's -203 43721 28847
dairy 1598 2874 8349
gardening 3764 4741 7417
Pig 4029 6261 8603
cereal 3452 835 9645
Goraj (1998) calls this surplus the monetary profit, i.e. the highest measure o:
the current economic situation of the farm. Solely in poultry farms a negative balance
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of flows appeared only in the first year of examinations. All groups of farms achieved the positive balance from operational activity. Financial means from operational activity were big enough for carrying the investment activity on and regulate obligations. The balance of financial flows in poultry farms achieved highest value in 2 and 3 of year, and lowest in 1 year of examinations.
Of remaining activities in all groups of farms debit balances were get. The capital investment spending was higher than incomes from their sale what depicts the development of farms. In analyzed years farms more paid off a loan than they drew out their vowels.
The balance from private activity in all groups was negative, because farmers took more financial means from the farm to their needs than they put from non-agricultural activity.
Figure 1 and 2 present financial flows in four areas of activity: operating, investment, financial and private. Farmers had the highest income from operational activity - about 85%, except for dairy farms - below 80%. For the financial situation of the farm generating financial means by operational activity plays a significant role. These centers allow investing and the repayment of debts without aid with outside sources of financing. Examined farms used outside sources of financing, therefore income from the financial activity were high and they took out even about 17% (dairy farms). In analyzed years farms used the following credit: fertilizer, commercial credit, private loan, credit for young farmers and dried fruit credit.
Figure 1 Structure of income mean for 3 years in %
♦ .,
_ . — - — A — - _
■ ♦ ■ operational activity —investment activity
—A- financial activity
)< private activity
poultry breeder's dairy
gardening
pig
cereal
100 -
90
80
70
60
50
40
30
20
10
0
Sales of assets fluctuated from 1% (poultry farms) to 4.7% (gardening farms). Income from personal activity constituted rewarding in poultry-breeder's and gardening farms and rewarding, the pension and the pension in remaining farms.
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Науковий вгсник ЛНУВМБТ 1мен1 С.З. Гжицького Том 10 № 3(38) Частина 3, 2008
Farmers incurred the heavy expenditure for operational activity (fig. 2). the Majority of an arable farms in Poland is financing the productive activity with individual means. It is caused with the weak income position of farms and a higher estimate of bank loans.
Figure 2 Financial flows in four areas of activity (expenses %)
---------- -
— »■_
" ♦ " operational activity investment activity -A" financial activity _private activity
poultry breeder's dairy
gardening
tpig
cereal
80
70
60
50
40
30
20
10
0
In examined farms they were allocating for the investment activity from 10% (cereal farms) to 19% (dairy farms) of total expenses. Poultry farms allotted financial means to the modernization of henhouses, but dairy farms for the modernization of barns and the purchase of machines. However farms specializing in the breeding of pigs they modernized piggeries and they bought agricultural machines. Farms specializing in the crop production enlarged acreage of the earth i.e. gardening and cereal. The capital investment spending was higher than incomes from their sale what is providing about the development of farms. Adamowicz (1998) thinks that higher investments are incurring belongings whom the user has the university education and general averages. In analyzed farms farmers had the secondary education largely.
Together with percentages the most they spent cereal belongings on the repayment of credit taken out and loans, because of about 22% total expenses, but least farm poultry-breeder's (10.8%). In examined years farms more spent money for the repayment of credit than they drew out their vowels.
The participation of expenses of needs for the farmer and members of his family fluctuated from 4% (poultry farms) to 20.3% (gardening farms). The balance from private activity in all groups was negative, because farmers took more financial means from the farm to their needs than they put from non-agricultural activity.
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Analysis of flows of money in the monthly arrangement allows to predict, which moment the farm will be lacking the cash in. He lets determine the possibility for investing both planning influences in the following year and expenses.
Generally analyzing monetary income in all farms one should state that they were biggest the July and the October. In pig farms monetary income increased month by month. They were lowest in January and highest in December. Producers of milk enjoyed considerable influence the October and the November. In the October money for the sold wheat was received and in November greater influences were get behind the milk. In May farms took credit out from the line „Young farmer". The poultry breeder's biggest sales of chicken broilers and eggs got in June, July and December. Gardening farms got the most money from the sale of fruits and vegetables in July and December, but farms cereal in August and October.
Figure 3. Monthly expenditures (%)
poultry breeder's
dairy
gardening
pig
cereal
January February March April May June July ^s^mber October November December
20
18
16
14
4
2
0
Farms took credit out mainly in the winter-spring period. Analyzed farms used long-term credits allocated for the purchase of the earth, machines and the modernization of farms and from short-term-fertilizer. Short-term credits are treated as the basic source of financing the agricultural production. The percentage participation of the working capital loan in financing investments in farms fluctuates between 10-30%. In farms explored by D^bniewska and Grabowski (1998) most of the money were donated on the purchase of fuel and mineral fertilizers.
Least of financial means was received in January by dairy and pig farms, in February to poultry and cereal farms and in May up to gardening belongings (fig. 3). Next the heavy expenditure carried poultry farms in November and remaining in December (fig. 4).
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Figure 4. Monthly income (%)
poultry breeder's " dairy
gardening —K- pig
cereal
January February March April May June July Augustgeptember OctoberNovemberDecember
In November much they spent money for the modernization of an buildings, and in December repayment of installments of bank loans including percentages.
When he results from the structure of presented expenses, mainly in this period mineral fertilizers and crop protection chemicals were being bought,
14
12
10
8
6
4
2
Conclusions
1. In the structure of monetary income operational activity had a large stake from 79.3% (dairy farms) to 86.6% (poultry farms).
2. Farms partly financed production and investment activity with bank loans and loans, therefore the participation of income from the financial activity in the structure fluctuated from 9.5% to 16.7%.
3. Farmers incurred the heavy expenditure for operational activity, because from 46.8% to 72.2%. Expenses of the repayment of credit were on a second place together with percentages, their participation fluctuated from 10.8% (poultry farms) to 22.4% (cereal farms).
4. In examined farms a cash wasn't missing, because greater financial influences preceded the greatest demand for the cash.
References:
1. Adamowicz M., 1998: Connection [individual] of arable farms with the market: analysis on the basis of results of the universal agricultural list from 1996. Zesz. Of sciences. AR Cracov, 55 (331) t. 1: 65 - 82
2. D^bniewska M., Garbowski M., 1998: financial problems of the farming in the aspect of integration with the European Union, the Ed. AE Wroclaw: 431 - 439
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3. Goraj L., 1998: Principles of the ranking of farms in the European Union. Zag. Econ. Roll. 1998 No. 2/3
4. Klepacki B., 2003: Changes of the level of intensity of the crop production in Poland in the nineties., Zesz. of sciences. SGGW 48: 123 - 131
5. Manteuffel R., 1978: Production specialization of an national arable farms. Problem notebooks of Progress of Agricultural Sciences. Zesz. 212: 29, PWN Warsaw
6. Rice and. (translation Swiderska G.), 1993: Bookkeeping without myths that is how to assess funds of the company., Business Press
7. Wojtaszek around., 1965: Criteria and measures of the ranking of privately owned farms according to directions and stairs of the many-sidedness of the production. Generation of Sciences roll., 78, PWRiL, Warsaw
8. Wyszkowska 1996: chosen elements of the quota financial analysis on the example of farming enterprises., Trials No. 78, ATR Bydgoszcz
Summary
In presented paper a numerical material gathered in three consecutive years of around 264 farms grouped according to direction of production were used. All groups of farms achieved the positive balance from operational activity. Operational activity brought the highest income to farmers - about 85%, except for dairy farms -below 80%. Farmers incurred the heavy expenditure for operational activity, because from 46.8% to 72.2%. Expenses of the repayment of credit were on a second place together with percentages, their participation fluctuated from 10.8% (poultry farms) to 22.4 % (cereal farms).
In examined farms cash wasn't missing, because greater financial influences preceded the greatest demand for the cash.
Cmammx nadiumna do peda^ii 25.08.2008
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