Purpose of Financial Management
Which of the following shows the proper sequence of management functions as they would be applied to a specific problem?
a. planning, control, implementation
b. planning implementation, control
c. control, planning, implementation
d. control, implementation, planning
b. planning, implementation, control
The basic account equation is Assets + Liabilities = Owners Equity.
True or False
False
The deprecation method with the greatest depreciation in the first year is....
a. 150% declining balance
b. double declining balance
c. straight line
d. all of the above have the same depreciation the first year
b. double declining balance
Alternatives to owning equipment include:
a. leasing
b. custom hire
c. renting
d. all of the above
d. all of the above
If output decreases with no change in total cost, the break even price will...
a. increase
b. decrease
c. remain constant
d. initially decrease and then begin to increase
a. increase
Which of the following is an example of a strategic decision?
a. determining fertilizer levels for crops
b. deciding when to sell grain
c. determining what type of legal organization to use
d. setting milking times for a dairy
c. determining what type of legal organization to use
A lender would usually prefer to have farm assets valued at their ________ value on a balance sheet as part of their loan application.
a. cash
b. accural
c. cost
d. market
d. market
For an asset to be depreciable, it must have a useful life of...
a. less than 1 year
b. exactly 1 year
c. at least 1 year
d. infinite useful life
c. at least 1 year
What is the future value of $2,000 deposited for 3 years at a 5% interest rate?
PV = FV/(1+1)^n
FV = PV*(1+i)^n
$2,315.25
Which of the following terms, if used on an enterprise budget, would be considered the same as variable cost?
a. ownership cost
b. operating cost
c. overhead cost
d. indirect cost
b. operating cost
which function of management is concerned with monitoring the results of a decision and taking corrective action.
a. planning
b. organization
c. implementation
d. control
d. control
a. greater than one
b. less than one
c. equal to one
d. there is no relationship between working capital and the current ratio
b. Less than one
Net farm income is the same as net farm income from operations in a year where no capital asset was sold.
True or False
True
Typically, the cost of owning a piece of equipment on a per acre basis is constant regardless of acreage or quantity produced.
True or False?
False
If the cash price in November is $6.50 and the futures prices is $10.00, the basis is....
a. -$3.50
b. $3.50
c. $16.50
d. None of the above
a. -$3.50
Good farm records can be useful when applying for a loan.
True or False
Using 50,000 in cash and a new loan of $40,000 to purchase land valued at $90,000 will cause equity to..
a. increase by $90,000
b. decrease by $90,000
c. increase by $40,000
d. not change
What is the average asset value for Bartlett Coop if beginning asset value is $200,000 and ending asset value is $252,450?
a. $226,270
b. $52,450
c. $226,225
d. $212,725
c. $226,225
When evaluating an investment, which method incorporates the time value of money?
a. simple rate of return
b. payback period
c. net present value
d. none of the above
c. net present value
All of the following are measurement of variability except...
a. range
b. standard deviation
c. mean
d. coefficient of variation
c. mean
External scanning could include assessing
a. the financial condition of the business
b. change in consumer tastes
c. the basic return on investment of new enterprises
d. productivity of the farmland owned
b. change in consumer tastes
the ability to meet financial obligations as they come due refers to.
a. solvency
b. liquidity
c. efficiency
d. effectiveness
The main difference between net farm income from operations and adjusted net farm income from operations is
a. gain/loss on sale of capital asset
b. interest expense
c. gain/loss sale of culled breeding livestock
d. there is no difference
b. interest expense
The payback period, simple rate of return, and net present value are good tools to assess the financial feasibility of an investment.
True or False
False (they are economic indicators, not financial)
Farmers are more likely to accept risk if
a. only a small loss in involved
b. they have a high debt to asset ratio
c. they have high fixed cash flow obligations
d. they are primarily concerned with maintaining their net world
a. only a small loss is invovled