Download Farm Business Mng Part1 Test/Key

2015 ND FFA Farm Business Management CDE
Part I
1. Technical analysis in reference to grain marketing refers to:
a. study of supply and demand
b. study of charts and trends
c. use of precision ag equipment d. use of futures and options
2. Which situation describes a positive basis?
a. price trend is higher
b. price trend is lower
c. cash price is higher than corresponding futures price
d. cash price is lower than corresponding futures price
3. 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
4. Which of the following factors would most likely lead to a strong basis?
a. Weak demand
b. Low supply c. Several months until harvest d. Plentiful supply
5. In general, when does basis tend to be weakest?
a. At harvest
b. Winter
c. Summer
d. Spring
6. 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
7. Working capital is a measure of:
a. Liquidity
b. Solvency
8.
c. Repayment capacity
d. Efficiency
Which of the following is not found on a balance sheet?
a. Intermediate farm assets
b. Personal assets
c. Long term liabilities
d. Total cash expenses
9. How is working capital calculated?
a. Labor hours divided by value of farm production
c. Current liabilities minus current assets
b. Current assets minus current liabilities
d. Gross income minus total cash expenses
10. 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
11. Interest that has accumulated on a loan but not yet been paid is called:
a. Current interest
b. Artificial interest
c. Deferred interest
d. Accrued interest
12. 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
13. 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
14. 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
15. 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.
16. 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.
17. You have just won the lottery. You are offered 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.
18. The term used to identify the difference between the cash price and the futures price for the time, place and
quality where delivery actually occurs is:
a. Net price
b. Basis
c. Option
d. Cash Market
19. The purpose of generating an annual income statement is to determine
a. If purchasing a new bull is a wise decision
b. If one should enroll in the FSA farm program
c. Collateral available for a loan
d. Net farm income
20. 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. 535
b. 504
c. 550
d. 551
21. 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
22. In the simplest terms, a market is the interaction of
a. goods and services
b. business with consumers and government
c. supply and demand
d. wholesalers and retailers
23. The cost of fertilizer is:
a. A direct expense
b. An overhead expense
c. A capital purchase
d. An intermediate asset
24. 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
25. A farm couple’s balance sheet will show their:
a. Net worth
b. Net farm income for the last completed calendar year
c. Gross farm income for the last completed calendar year
d. Bushels of wheat yielded per acre for their last harvested crop
26. It costs a farmer $230.00 to grow an acre of wheat. At a yield of 45 bushels per acre what is his cost of
production per bushel?
a. $4.82
b. $4.98
c. $5.11
d. $5.33
27. A farmer obtained a $100,000 loan to purchase 40 bred cows. The term of the loan is 5 years, the interest rate is
4.8%, and payments are to be made annually. This loan is an example of:
a. A non-farm liability
b. A current liability
c. A long term liability
d. An intermediate liability
28.
29.
The price of land depends on
a. its productivity
b. the price that its products command
c. the demand for it
d. all of the above
Which of the following ratios would give a loan officer the best indication of the collateral a farm borrower
has available?
a.
b.
c.
d.
Current ratio
Operating expense ratio
Net farm income ratio
Debt to asset ratio
30.
A purely competitive industry is characterized by
a. no single seller with any control on price
b. a single seller
c. much advertising
d. a small number of large farms
31.
True or false: Crop insurance premiums are never subsidized by the United States government.
a. True
b. False
32.
If I purchase some farm land for $1500/acre, the real estate taxes were $5/acre and I received $80/acre cash
rent what would my rate of return be calculated as
A 5%
b.1875%
c. 5.33%
d. 6%
33.
Which of the following statements is true in defining the relationship between a balance sheet and an
income or profit and loss statement?
a. The income statement shows how much your assets are worth.
b. A balance sheet shows what you own while an income statement shows what your assets earn.
c. The income statement shows what you own while the balance sheet shows what your assets earn.
d. The balance sheet and income statement are not related.
34.
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 of the 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.
35.
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.
36. Which of the following would be the best example of an overhead cost?
a. Farm insurance
b. Repairs
c. Land rent
d. Fertilizer
37. How do you calculate Net Farm Income:
a. Gross Income – Total Cash Farm Expenses
b. Total Assets – Total Liabilities
c. Gross Income – Total Cash Farm Expenses – Depreciation +/- Inventory Changes
d. Gross Income – Total Cash Farm Expenses – Capital Purchases
38. Which of the following factors might cause a business to be profitable, but have a negative cash flow?
a Excessive family living withdrawals
b. large term debt principal payments
c. both a and b
d. it is not possible to be profitable and have negative cash flow
39. Which Farm Financial Ratio is calculated through using the balance sheet:
a. Profitability
b. Repayment Capacity
c. Liquidity
d. Financial Efficiency
40. 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
41. 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
42. A farmer purchases 800 pound feeder steers for $2.02 per pound and plans to sell the steers at 1300 pounds.
The farmer estimates the total cost of gain to be $.90 per pound. The nearest breakeven price when the
steers are sold at 1300 pounds is:
a. $2.14 per pound
d. $1.59 per pound
b. $1.80 per pound
e. None of the above
c. $2.02 per pound
43. The Chicago Wheat Futures Contract is for:
a. Hard Red Winter Wheat
b. Hard Red Spring Wheat
c. Soft Red Winer Wheat
d. Durum Wheat
e. All of the Above
44. 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
45. At the beginning of last year, a farmer had an outstanding loan for $225,000. The interest rate was 7% APR. If
the farmer made one loan payment at the end of the year of $20,500, wat was 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
46. 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
47. Total Interest to be paid over the life of an amortized loan equals:
a. Number of payments times size of payment
b. Number of payments times size of payment minus amount borrowed
c. Amount borrowed times interest rate
d. Amount of money borrowed times interest rate times number of payments
e. None of the Above
48. 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
49.
A farmer’s goal may be to have a net income ratio of 20%. He/she wants a net income of at least $80,000.
What would be the $ target for Gross Income on the accrual adjusted basis?
a. $160,000
b. $400,000
c. $1,600,000
d. 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 numb er 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
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50. E