Basics
A strategic spending plan based on projected income and expenses that serves as a financial blueprint for operations
Budget
Costs that remain constant regardless of the volume of production.
Fixed Expense
Money received as pay for work performed or services provided, such as wages or salary.
Earned Income
Bankers look for this to ensure you can meet short-term obligations and variable costs.
Working Capital or Liquidity
The type of depreciation where the value stays the same year after year.
Straight Line Depreciation
This term refers to the increase in the value of an asset over time.
Appreciation
Ag operations with clear documentation of "Actuals" vs "Budgeted" figures have this percentage probability of loan approval.
85%
What was the Oxford word of the year in 2023
Rizz
This term refers to the estimated costs or income before they actually occur.
Budgeted
Costs that change directly based on the volume of production.
Variable Expense
Unearned revenue coming from rental properties, royalties, or limited partnerships.
Passive Income
These are mandatory when applying for operating loans to provide banks with confidence in cost estimates.
Budgets
An accelerated method where the asset declines more in value when it is newer.
Declining Balance
This is the most common example of an appreciating asset in agribusiness.
Farmland
This person evaluates your financial management and risk profile.
Banker/Lender
This fruit is the most produced crop in the world by weight
Bananas
This represents the real amount of money spent or earned by the end of the year.
Actual
Land rent, property taxes, and insurance premiums are examples of this type of expense.
Fixed Expense
Investment-based earnings including interest, dividends, and capital gains.
Portfolio Income
A "Green Flag" for banks where you project realistic yields rather than best-case scenarios.
Conservative Estimates
This method is exactly twice as fast as the standard declining balance method.
Double Declining Balance
Besides land, this type of agricultural asset (specifically breeding animals) can appreciate.
Livestock
A "Red Flag" caused by estimates that don't align with market reality or errors in the spreadsheet.
Poor Records
This "King of Crops" is grown in every U.S. state except Alaska and is used for everything from fuel to taco shells
Corn
These allow producers to allocate resources effectively to ensure sales and marketing efforts are funded.
Budgets
Seed, fertilizer, and fuel are examples of this type of expense in agriculture.
Variable Expense
Tips and commissions fall under this category of income.
Earned Income
Lenders look for a clear margin between projected income and total debt service to measure this.
Capacity to Repay
This method bases depreciation on the actual usage of the asset, such as hours a water pump has run.
Units of Production
This is the reduction in value of an asset due to wear, tear, or obsolescence.
Depreciation
These are used to justify current budget projections by showing what happened in previous years.
Past Budgets/ Historical Records
This state is known as the "Salad Bowl of the World" because it produces nearly half of all the fruits, nuts, and vegetables grown in the United States.
California
When budgeted and actual income do not align, it is known as this.
Discrepancy
Harvest labor is categorized as this type of expense because it depends on the amount of crop produced.
Variable
This strategy involves having multiple income streams to reduce reliance on a single commodity.
Diversification
This "Red Flag" involves high family living expenses that exceed the net earnings of the farm.
Lifestyle Drag
The formula (Cost - Salvage Value) / Useful Life is used for this method.
Straight Line
This is one of the two main causes of appreciation mentioned in your notes.
Demand or Improvements
This "Red Flag" occurs when there is no clear management explanation for a difference in budgeted vs actual income.
Unexplained Gaps/ Discrepancies
Which soft drink was originally invented as a medicinal tonic in 1885?
Dr. Pepper
An agribusiness owner purchased a 50-acre plot of raw land for $250,000. Over the next five years, they made improvements by installing an advanced irrigation system and planting high-yield apple trees. Due to these improvements and increased market demand for local produce, the land's value increased by 15%. What is the new appreciated value of the land?
$287,500
If your total assets are $1,000,000 and your total liabilities are $400,000, this is your Net Worth (Equity).
$600,000
On-farm labor and off-farm professional services are both examples of this.
Earned Income
These trigger bank inquiries and may require a budget revision.
Significant Discrepancies
This method uses the formula: (Remaining Years / Sum of Years) x (Cost - Salvage Value).
Sum of Year Digits
This is the estimated value of an asset at the end of its useful life.
Salvage Value
If a tractor costs $100,000, has a salvage value of $20,000, and a useful life of 10 years, this is the annual straight-line depreciation.
$8,000
What is the only continent on Earth that does not have any active volcanoes?
Australia