Capital As A Factor of Agricultural Production | Types and Characteristics of Capital | Importance of Capital

FACTORS OF PRODUCTION 

Land, labour, capital and management are the most essential elements or factors of production in agriculture. For productive purposes, the four (land labour, capital and farm manager) are employed in combination.

DEFINITION OF CAPITAL 

Capital is the resource (money, wealth, machines or equipment) used for the production of more resources. Capital is very important for setting up a farm business.

The reward for capital is interest.

CHARACTERISTICS OF CAPITAL 

The characteristics of capital are follows,

1. It is man made factor of production.

2. Its reward is interest.

3. It made production of goods and services possible.

4. It requires hardworking and savings to organize.

5. Source of capital is saving, gift from family and friends, loans, etc.

TYPES OF CAPITAL 

The two (2) major types of capital include:

A. Fixed Capital

Fixed capital includes physical assets of the agricultural business such as land and building, furniture and fittings, equipments and tools, machineries, etc. Fixed capital is used on daily basis and using depreciated in value with time.

B. Current Capital 

Current capital is also known as working capital. It is the different between assets and liabilities of the agricultural business.

IMPORTANCE OF CAPITAL

The importance of capital are as follows,

1. It aids production.

2. It attracts business investors.

3. It is used for buying raw materials.

4. It settles wages and salaries of labour.

5. It promotes goods and services.

6. It produces more capital.

QUESTION

1. Capital is a basis for establishing a successful business. Discuss.

2. Outline and discuss types of capital.

3. Mention 5 characteristics of capital.

4. List 5 importance of capital.