2008 STATE FFA FARM BUSINESS MANAGEMENT CONTEST

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1 2008 STATE FFA FARM BUSINESS MANAGEMENT CONTEST The information in this section will be used to complete the problem-solving portion of the Farm Management Test. In the balance sheet analysis, you will need to use the following ratios: For the Joel Anderson Farm, please use $40,000 for unpaid family and operator labor and management. Current Ratio = Ownership Equity = Leverage Ratio = Current Debt Ratio = Debt to Asset Ratio = Net Farm Income = Operating Profit = Margin Ratio Current Assets Current Liabilities Net Worth Total Assets Total Liabilities Net Worth Current Liabilities Total Liabilities Total Liabilities Total Assets Net Cash Farm Income after being Adjusted for inventory change and then by depreciation. Net Farm income + interest paid - value of unpaid family labor and Management. Farm Production (Accrual)= Total Farm Receipts feeder livestock purchased purchased feed + inventory change INFORMATION FOR THE ANDERSON FARM INCOME STATEMENT Total farm receipts 410, , ,750 Total farm expenses 402, , ,821 Includes Interest Interest paid 12,901 16,222 19,161 Inventory change 11,000-4, ,250 Depreciation (-16,000) (-26,500) (-22,500) Average farm assets 979, ,534 1,168,132 Average farm debt 413, , ,321 Off Farm Income 15,000 16,200 18,000 Opportunity cost of farm capital 6% 6% 6% 1

2 2008 STATE FARM MANAGEMENT CDE PART ONE KEY 1. E 26. C 2. A 27. B 3. B 28. D 4. A 29. B 5. C 30. A 6. C 31. C 7. B 32. E 8. D 33. A 9. D 34. B 10. A 35. A 11. D 36. A 12. B 37. A 13. A 38. B 14. B 39. B 15. D 40. C 16. A 41. B 17. C 42. D 18. D 43. A 19. B 44. A 20. C 45. B 21. A 46. D 22. D 47. B 23. C 48. B 24. C 49. B 25. D 50. D

3 2008 Farm Business Management CDE PART ONE Multiple Choice Do not write on this test, mark your Grademaster score card with a #2 lead pencil. Make dark marks, erase completely to change, make no stray marks. 1. If a farmer earns $50,000 net income and also earns $20,000 non-farm income, and spends $40,000 on family living. A. his/her gain in net worth is $70,000 B. has only $30,000 in his /her retirement account C. has a disposable income of $70,000 D. is able to gain $30,000 of equity E. both C & D 2. A farm with a capital replacement margin of $20,000 (cash basis) should be able to buy a $10,000 piece of equipment without borrowing any money. 3. A crop produces $200 of gross income and produces 50 bushels per acre. The total cost per bushel is $3.90. What is the net income per acre? A. $4.00 B. $5.00 C. $.10 D. none of the above. 4. The high profit farms in Western ND in 2007 had a operating exp ratio of 53%, a depreciation expense ratio of 4%, and a depreciation expense ratio of 4%. What was their net farm income ratio? A. 39% B. 47% C. None of above acres of pasture is rented for $15 per acre. 20 cows with calves can be maintained for 5 months on this pasture. What is the cost per AUM? A. $ B. $ 3.75 C. $24.00 D. $ In the above situation, what is the yield per acre in AUMs? A aums/acre B.625 aums /acre C. 1.6 aums/acre D. Cannot be calculated with given information

4 7. In a particular county in western ND it is said that the average pasture yield is.4 AUMs per acre. Given this information would it be less expensive to pay $10/ acre or $ 20 per AUM? A. Less expensive to pay $ 10/acre B. Less expensive to pay $ 20 /aum. 8. Capital goods are; A. machinery B. buildings C. highways and bridges D. all of the above 9. Decisions in a market economy are coordinated by A. the government B. business firms C. consumers D. prices 10. The elasticity of demand for wheat depends on: A. the availability of close substitutes B. the size of expenditures on wheat relative to consumer s budgets C. the amount of time people have to make adjustments D. all of the above 11. A farmer s costs consist of A. variable (direct) costs + average costs B. fixed (overhead) costs + marginal costs C. total costs marginal costs D. fixed (overhead) costs + variable (direct) costs 12. In periods of rising prices, A. investments that would normally be profitable appear unprofitable B. investments that would normally be unprofitable appear to be profitable C. investment prospects are unaffected D. fewer investment opportunities present themselves 13. Saving can be defined as A. income consumption B. income planned investment C. consumption planned investment D. consumption + planned investment 14. The worldwide inventory of wheat available for sale has no effect on the market price of wheat.

5 15. When using an accrual accounting system A. A crop is considered income when it is harvested B. Fertilizer is considered an expense when it is put into the soil C. Vaccine is considered an expense when injected into a calf D. All of the above 16. For wheat, the average September futures price during the month of February is used as a base for determining federal crop revenue insurance coverage. 17.A farmer has a loan for $57,400 with a term of six months. The interest rate on this loan is 8.20%, If the loan is paid in full with only one payment, and is paid on the exact due date, how much interest will the farmer pay on this loan? A. $ B. $4, C. $2, D. $1, Which of the following choices contains only intermediate assets? A. Check for cows sold, corn silage, corrals B. Loan to buy tractor, Ford pickup, grain bins C. Feeder wagon, fertilizer, herd bull D. Bred cows, New Holland baler, computer is considered a better current ratio than Which of the following is considered the best debt to asset ratio? A. 36% B. 51% C. 22% D. 64% 21. Working capital is the operating capital available in the short term from within the business. 22. A ranch increased the size of his herd of 180 cows to 200 by adding 20 bred heifers. Every cow and bred heifer had a calf. Two cows had twins. What is the calving %? A. 97.5% B. 100% C. 98.5% D. 101%

6 23. A farmer is not able to pay back all of his 2007 operating loan with income from Most lenders do not like to carry old short-term debt into 2008 for payment with 2008 income. What is his best option? A. Beg the banker to write it off. B. Add 2007 debt to 2008 operating loan. C. Transfer short-term credit to intermediate and long-term loans, if there is adequate equity left in the collateral. D. Use credit cards to pay off 2007 operating loan. 24. The 2007 grain growing season in North Dakota turned out to be one of the best profit years that most farmers have ever had. What is the main reason? A. Abundant rain B. High crop yields C. High prices D. Hot, dry summer 25. Accrued interest is the amount of simple interest that has accumulated against a loan and can be calculated to any date. On January 10, 2007 Bill borrowed $140,000 at 7% interest to buy an air seeder. On October 15 he made his regular payment in full. His principle balance on the loan on is $123, What is his dailyaccrued interest on this loan balance if the bank uses 365 day year? A. $6.98 B. $9.98 C. $15.47 D. $ If a farm family spends $54,000 for family living and income tax. How much do they need to net over direct and overhead costs on every acre they grow crops on if they crop 2000 acres? A. $20/acre B. $24.55/acre C. $27/acre D. $40/acre 27. If a farm family spends $60,000 for family living and nets $46,700 from the farm, what is the minimum amount of take home pay that they would need to earn from off farm income if they wanted to maintain equity? A. $36,800 B. $13,300 C. $60,000 D. $54, Why are corn prices so high? A. Shortage of corn acres B. Strong demand for human and animal use. C. Ethanol plants D. All of the above

7 29. If NH3 is selling for $875 per ton, what is the cost per lb. of actual N? A. $.4375 B. $.53 C. $.26 D. $ If a farmer decides to use $1050 per ton for his phosphorous needs and decides to apply 40 lbs. of material per acre, what is the cost per acre? A. $21 B. $25 C. $33 D. $ The first step in developing a marketing plan is: A. Establish a margin account B. Select a commodity broker C. Determine the cost of production D. Check the prices at the local elevator 32. A rancher in western North Dakota wants to hedge his spring calf crop for sale in December. He would sell a using the Futures Market. A. Life insurance policy B. Call option C. Long position D. Margin E. Futures contract 33. A long call option is: A. The right to buy the underlying futures contract. B. The right to sell the underlying futures contract C. The right and the obligation to buy the underlying futures contact. D. The right and the obligation to sell the underlying futures contract. 34. Net Farm Income includes a value for the operator s labor and management. 35. The Term Debt Coverage Ratio factors in a value for net nonfarm income. 36. Rate of Return on Assets is equal to the product of the Operating Profit Margin and Asset Turnover Rate

8 37. Working Capital is the difference between Total Current Assets minus Total Current Liabilities. 38. A farmers breakeven for crops is figured by dividing the direct cash expenses by the production. 39. If a pasture provides 2025 a.u.m.s (animal unit months) for a season, a cow requires 1.5 aum's/month and the season is 6 months long. How many cows can be put in the pasture (round up if necessary)? A. 180 cows B. 225 cows C. 254 cows D cows 40. In the year 2007 the maximum allowable section 179 expense was? A. $108,000 B. $157,000 C. $125,000 D. $100, If Return on Assets is higher than Return on Equity, then borrowed money is being used efficiently. 42. When a farmer sells hard red spring wheat, what is the standard weigh is this sold at? A. 30lbs B. 48lbs C. 50lbs D. 60lbs 43. Prices are driven by supply and demand. When supplies are low for a commodity, prices will tend to be: A. higher B. lower C. same D. all of the above 44. A farmer invests $ per acre to grow wheat and wishes to protect his floor price per bushel would? A. Buy a put option B. Buy a call option C. Buy more fertilizer D. Buy more crop insurance

9 45. A rancher has a choice of four feeds for his cows. Which one has the highest price per pound? A. $6.10 per bushel B. $5.75 per bushel C. Mixed $45 per ton D. Distillers grain $180 per ton 46. A producers optimum profit is achieved when: A. He or she gets the highest price for the commodity produced B. They are a low cost producer C. When your spouse finds off-farm employment D. When you produce to where marginal costs equal marginal returns 47. A investment doubled in value in ten years, what was the average return? A. 10% B. 7.2% C. 5% D. 8.9% 48. Depreciation on farm machinery is a cash expense 49. When working from an income statement, family living is considered a cash expense 50. In 2008, Edward Schafer was named US Secretary of Agriculture. What previous major office had Mr. Schafer held in North Dakota A. County Commissioner B. ND deputy Ag Commissioner C. Tax Commissioner D. Governor E. None of the above

Balance Sheets- step one for your 2018 farm analysis

Page 1 of 21 Name Address Phone Email Balance Sheets- step one for your 2018 farm analysis The farm s balance sheet is a snapshot, on one day in time, of what the farm business owns, (its assets), and