Download Farm Business Management Part 1

2016 CDE Farm Business Management
Part I
1. Cooperatives pay patronage refunds according to
a. One man, one vote.
b. Size of farm.
c. Amount of business done by patron.
d. Total assets.
e. All of the above
2. Livestock, stored grain, land, and personal property
used to secure a loan are
a. Collateral.
b. Inventory.
c. Liabilities.
d. Net worth.
e. liquid.
3. An LLC (Limited Liability Company) is usually
a. Taxed like a corporation.
b. Taxed like a partnership.
c. Not for profit and therefore not taxed.
d. Illegal in North Dakota.
. 4.. A Farmer has a long-term loan with a fixed interest rate and amortized annual payments. With each
annual payment the farmer makes the amount of principal each installment repays would normally:
5.
e. Decrease
b. Increase
c. Remain the same
d. None of the above
e. None of the above
Which of the following would likely be considered the most desired debt-to-asset ratio?
a.
b.
c.
d.
6.
98%
62%
53%
41%
A producer should continue, in the short term, to raise an enterprise if which of the following applies?
a.
b.
c.
d.
His lender suggests he/she do so.
The spouse agrees to help with the marketing of the production from the enterprise.
All direct cost are covered and there is some contribution to overhead costs.
The net loss per unit is not greater than twice the labor and management
7. If the July futures price is $5 and the September futures is $5.50 what is your local basis?
a) +.50
b) -.50
c) Not enough information
d) $5.50
8. In general, when does basis tend to be weakest?
a) At harvest
b) Winter
c) Summer
d) Spring
9. Which of the following strategies would be best to use when basis is weaker than normal?
a) Forward contract cash sale
b) Basis contract
c) Minimum price contract
d) Hedge-to-arrive contract
10. Working capital is a measure of:
a) Liquidity
b) Solvency
c) Repayment capacity
d) Efficiency
11. Which of the following ratios can be calculated from a balance sheet?
A. Operating expense ratio
B. Depreciation expense ratio
C. Debt to asset ratio
D. All the above
12.
13.
14.
15.
16.
How is working capital calculated?
a. Labor hours divided by value of farm production
b. Current assets minus current liabilities
c. Current liabilities minus current assets
d. Gross income minus total cash expenses
An accrual-based income statement should provide you with:
A. Farm profitability for the year
B. Farm debt to asset ratio
C. Income taxes due
D. None of the above
What IRS tax provision is used to expense capital assets the year they are purchased?
A. Schedule C
B. Schedule F
C. Section 179
D. Schedule D
Which of the following is not found on an accrual-based income statement?
a. Total farm liabilities
b. Net cash farm income
c. Inventory changes
d. Depreciation
Which of the following ratios would be the best indicator of farm profitability?
a. Rate of return on farm assets
b. Asset turnover rate
c. Working capital to gross income ratio
d. Debt to Asset Ratio
17.
Which of the following would not be found on a cash flow statement?
a. Total grain sales
b. Loan payments
c. Depreciation
d. Family living expenses
18.
If Wendy’s actual production history (APH) for wheat is 40 bu. per acre and she bought 75% insurance coverage,
how many bushels per acre would she insure with a yield protection policy?
a. 20 bu. per acre
b. 25 bu. per acre
c. 30 bu. per acre
d. 35 bu. per acre
19. Using Wendy’s APH from the previous question, assume Wendy decided to use a 75% revenue protection plan,
and the average spring wheat futures price was $4.50/bu. for the month prior to buying insurance (beginning
guarantee). Her revenue guarantee is:
a. $135 per acre
b. $150 per acre
c. $165 per acre
d. $180 per acre
20. Using Wendy’s APH and beginning guarantee from the previous questions, assume the average spring wheat
futures price at harvest is $5.00/bu. Her final guarantee is:
e. $140 per acre
f. $150 per acre
g. $160 per acre
h. $200 per acre
21. Wendy Wheatgrower is considering adding a fee hunting service to her farm. If annual fixed costs to operate the
service are $8,000 and variable costs are $25 per hunter, how many hunting days must be sold annually to breakeven
assuming a price of $150/day?
a. 50 days
b. 64 days
c. 77 days
d. None of the above
22. Pasture cost for beef cattle has been increasing over time. Grazing land can be rented by the per acre cost for the
season, or sometimes is paid for by the AUM (animal unit month) which a cow grazing for a months’ time. What is
the least expensive way given this info: the pasture rents for $16 per acre. You are allowed to graze 45 cows for 5.5
months. Cow owners must keep fence adequately repaired. The pasture consist of 600 acres. Pasture rent can be paid
on an aum basis at $ 25 per AUM. There is good water for cattle on the 600 acres.
a. Least expensive is to pay by the acre in this case
b. Least expensive is to pay by the AUM in this case
c. Cannot determine best method based on info given.
23. A loan taken out for a piece of machinery to be paid back over five years is a(n):
a. Current Liability
b. Long Term Liability
c. Intermediate Liability
d. Other Liability
24. The following is NOT an example of an opportunity cost:
a. The cash rent income given up to farm a quarter of land.
b. Death loss in a cattle operation.
c. The value of working off the farm full time instead of working full time on the farm.
d. Soybean revenue foregone when corn is planted.
25. Which of the following statements is true?
a. As demand for corn increases, the price of corn decreases.
b. When the supply of corn is long, the price rises.
c. There is no relationship between the demand for corn and the price of corn.
d. When the supply of corn is long, the price of corn decreases.
26. Allocating the cost of an asset over the useful life of the asset is called:
a. Depreciation
b. Asset Allocation
c. Appreciation
d. Expense Election
27. A shepherd has 300 ewes to give birth in the spring. Of those ewes, 292 give birth to 492 lambs. Prior to
weaning 21 lambs die. He weans 471 live lambs. The lambs weigh an average of 72 pounds at weaning. To the
nearest whole number, what is the lambing percentage of this flock?
a. 149%
b. 157%
c. 164%
d. 175%
28. Using the data for the flock in the previous question, to the nearest whole number, what is the weaning
percentage?
a. 141%
b. 146%
c. 151%
d. 157%
29. Using the data for the flock in the previous Question, to the nearest whole number, how many pounds are weaned
per ewe?
a. 107
b. 113
c. 119
d. 125
30. Using the data for the flock in the previous question, to the nearest hundredth, what is the death loss percentage of
these lambs?
A 4.27%
b. 4.46%
c. 7.00%
d. 7.19%
31.
Your grandfather offered you the choice of taking $10,000 today or $13,000 over a five year period. Which of
these should you consider in making your decision?
a. Your college education.
b. Your current debt.
c. The time value of money.
d. Your need for a new car.
32. A rancher exposes 220 cows to bulls. Of those 220 cows 212 give birth to 212 calves. At weaning
he has 204 live calves with an average weaning weight of 572 pounds. How many pounds are
weaned per exposed cow (to the nearest pound)?
a.
b.
c.
d.
484
504
530
551
33. Assuming that during the year a farm family had no non-farm income, theoretically net farm income should
equal:
a. The value of owned machinery minus the depreciation
b. The total of cash farm income plus the total of capital sales
c. Family living expense plus increase in net worth
d. Total assets minus total liabilities
34. The cost of fertilizer is:
a.
b.
c.
d.
A direct expense
An overhead expense
A capital purchase
An intermediate asset
35. Which of the following choices contains only Current Assets?
a. Wheat in a bin, a pole barn, a four wheel drive tractor
b. A grain auger, 900 tons of corn silage, a combine
c. Coop stock, pasture land, 800 bales of hay
d. Cash in checking account, feeder calves, corn in a bin
36. It costs a farmer $290.00 to grow an acre of wheat. At a yield of 45 bushels per acre what is his cost of
production per bushel?
a. $4.98
b. $5.20
c. $5.70
d. $6.44
37.
If I purchased some farm land for $1,500/acre, the real estate taxes were $5/acre and I received 80$/a cash rent
what would my rate of return be calculated as
a. 5%
b. 1875%
c. 5.33%
d. 6%
38.
Crop insurance premiums are never subsidized by the United States government.
a. True
b. False
39.
A forward contract is defined as:
a. An agreement to buy or sell a set amount of a commodity at a predetermined price and date usually on a
commodities trading floor.
b. A cash market transaction in which delivery other product is deferred until after the contract has been made.
c. Contract to sell product at a specific price at a specific date.
d. A contract that gives the purchaser the right to purchase the product at a specified price.
40.
Which of the following statements regarding cash flow analysis is NOT true?
a. It is important to do a cash flow analysis on a regular basis to avoid cash flow problems.
b.. Cash flow analysis can help you make good management decisions.
c. You will need to estimate the timing of your cash inflows and cash outflows to do an accurate cash flow
analysis.
d. Cash flow analysis uses historic data, not projections.
41
Which of the following would be the best example of an overhead cost?
a. Farm insurance
b. Repairs
c. Land rent
d. Fertilizer
42.
Define Solvency
a. Shows the borrower’s ability to repay term debts on time
b. The difference between the value of goods produced and the cost of resources used in their production
c. Ability of your business to pay all its debts if it were sold tomorrow
d. Ability of your farm business to meet financial obligations as they come due
43.
A farmer sold his 5000 bushel corn crop at several different times during the year. He sold 1000 bushels at$4.20,
2000 bushels at $4.60, and 2000 bushels at $4.80. What was his average price?
a.
b.
c.
d.
e.
$4.40
$4.50
$4.60
$4.70
None of the Above
44
ii. 45.
A farmer purchases 800 pound feeder steers for $1.30 per pound and plans to sell the steers at 1350 pounds.
The farmer estimates the total cost of gain to be $.80 per pound. The nearest breakeven price when the steers
are sold at 1350 pounds is:
1. $1.36 per pound
2. $1.27 per pound
3. $1.10 per pound
4. $1.05 per pound
5. None of the above
The Chicago Wheat Futures Contract is for:
A. Hard Red Winter Wheat
b. Hard Red Spring Wheat
c. Soft Red Winter Wheat
d.
Durum Wheat
f. All of the Above
46. Farmer Jones has less current assets than current liabilities. His current ratio is:
a. Negative
b. Zero
c. Between 0 & 1
d. Greater than 1
e. None of the Above
47. At the beginning of last year, a farmer had an outstanding loan for $225,000. The interest rate was 5% APR. If the
farmer made one loan payment at the end of the year of $20,500, what is the outstanding balance at the end of
the year?
a. $204,500
b. $215,750
c. $219,500
d. $220,250
e. None of the Above
48. The CME Feeder Cattle Futures contract is for _____ Pounds of Fed Cattle.
a. 10,000
b. 40,000
c. 50,000
d. 100,000
e. None of the Above
49. The term “Exchange Rate” refers to:
a. How much of one currency is needed to acquire a unit of another currency
b. How much principal is reduced by payments on an amortized loan
c. The ratio between current & long term debt
d. The difference in value between a dollar today and a dollar one year from today
e. None of the Above
50. For an amortized loan, the present value of the loan payments discounted at the loan’s interest rate is equal to:
a. The amount of money borrowed
b. The number of payments times the payment amount
c. Total interest paid over the life of the loan
d. The size of the annual payment
e. None of the above