Farm Business Analysis
What are the four basic types of farm business analysis?
Profitability
Farm Size
Financial
Efficiency
What is the two major ways that we measure farm size in the US?
Gross revenue
Amount of production (Acres farmed/Livestock numbers)
Each type of crop or livestock is considered an ____________
enterprise
If a producer desires to analyze the addition or reduction of a part of their farming operation, a ________ _________ should be used.
partial budget
_____________ has one of the highest ratios of capital to workers in U.S. industries.
Agriculture
What are two of the three farm financial measures that are used to evaluate liquidity?
•Current ratio
•Working capital
•Working capital to gross revenue
What is the major measure of farm profitability used in the US?
Net Farm Income
Seed, fertilizer, labor, fuel are all considered what type of costs?
Operating or variable costs
If a partial budget is positive, the producer should or should not do the action being analyzed.
Should
__________ is the ability to borrow money with a promise to repay the money in the future along with interest for its use.
Credit
What are two of the three farm financial measures that are used to evaluate solvency?
•Debt–to–asset ratio
•Equity–to–asset ratio
•Debt–to-–equity ratio
What is the most popular way to measure capital efficiency on a farming operation?
Asset turnover ratio
The time period for an enterprise budget is usually ____________
one year
What are the four areas of a partial budget?
Additional costs and reduced revenue
Additional revenue and reduced costs
What are three sources of capital for producers?
Owners equity
Outside equity
Credit
(Know what each of these are/examples)
If a farm's solvency is too low, what are ways to raise it?
Increase net farm income
Sell assets, reduce debt
Attract outside equity
Improve profitability
What type of efficiency measures bushels harvested per acre, pounds of milk per cow, etc?
Physical efficiency
What is the difference between economic and accounting based enterprise budgets? (What factor is considered?)
opportunity costs
If the sum of additional revenue and reduced costs exceeds the sum of reduced revenue and increased costs the change will ____________ profit
increase
The largest holder of US Farm Debt of real estate is
the Farm Credit System
What does EBITDA stand for on an income statement?
Earnings Before Interest, Taxes, Depreciation, and Amortization
Asset turnover ratio X Operating profit margin ratio = ?
Rate of return on farm assets
Many universities and/or government agencies will use enterprise budgets to compute ___________ __________. Most will do this for both yield and price.
Break-even analysis
If you are using low, average, and high values for prices and yields, you are using ___________ _________ in your partial budget.
sensitivity analysis
they have little effect on liquidity or cash flow unless the asset is sold.