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Worksheetsagriculture business
Total questions: 100
Worksheet time: 50mins
Accrued interest on a balance sheet refers to
interest that is past due.
interest that has accumulated since the last loan payment.
interest on short-term debt.
interest forgiven by the lender.
If both demand and supply increased equally for an agricultural product, what will be the result on the quantity of the product sold and the price received?
The same quantity will be sold at the same price.
An increased quantity will be sold at a lower price.
An increased quantity will be sold at a higher price.
An increased quantity will be sold at the same price.
When a farmer borrows money to purchase land, he usually must offer the title to the property as security until the debt has been repaid. This credit instrument is commonly referred to as a
sales contract.
promissory note.
mortgage.
check.
The cost of producing one additional unit of output is called
opportunity cost.
substitution cost.
average cost.
marginal cost.
The cost of using a resource based on what it could have earned in the next best alternative is:
An opportunity cost
Always a variable cost
Always a fixed cost.
Never a consideration in enterprise analysis
If the total revenue of a farmer will cover his variable costs and some but not all of his fixed costs, he will:
Minimize his losses by producing in the short run
Not produce anything if he is smart
Show a return to all factors of production.
Minimize his profits by continuing to produce.
In analyzing the ongoing farm business, depreciation should be considered as:
A variable cost.
A fixed cost.
An opportunity cost.
An operating cost.
Which of the following statements describe the advantage of a family-farm corporation?
Corporations do not pay income tax.
A family corporation avoids personal liability and the liability is limited to the investment in
the farm business.
There is little or no market for a shareholder if he decides to sell his interest in the farm business.
It is less expensive to establish a corporation structure.
It is profitable for a farmer to borrow money to expand his farm business when the borrowed money:
Returns more than the cost of borrowing money
Can be secured at a low interest rate.
Can improve the level of production.
Will increase volume of business.
A decline in value of an asset over its useful life associated with use, age and obsolescence is known as:
Appreciation
Depreciation
Inventory
Hedging
Which of the following is not a fixed cost in the use of a tractor?
Insurance
Depreciation
Oil and grease
Interest on borrowed money
Items that are least marketable and least readily converted into cash without loss.
Current assets
Intermediate or working assets
Intermediate or working liabilities
Fixed or long term assets
Livestock, land, and other personal property used to secure a loan.
Collateral
Amortized
Mortgages
Principle
Long-term credit should be used to:
Purchase cattle
Purchase machinery
Purchase land and buildings
Purchase fertilizer
One of the most important points to consider in developing a lease between a tenant farmer and a landlord is that it should:
Be in writing
Specify the land description
State the type of crops to produce
Be an oral agreement
The term “amortize” refers to:
expenses a business incurs before it starts operations
a loan that is set up with equal installment payments
an inability to repay a loan
making a quick decision without any thought
If a Producer has a $60,000 equipment loan that is payable in four annual installments of $15,000 each, he would show a current liability of ___ and a fixed liability of ___
$30,000 and $30,000
$45,000 and $15,000
$15,000 and $45,000
$0 and $60,000
Since gasoline is a commodity that most people cannot do without, a relatively large price increase results in a relatively small decrease in the amount of gasoline demanded. The demand for gasoline, therefore, could be said to be:
marginal
elastic
inelastic
at equilibrium
If a cattle operation with 50 head of cattle requires the same equipment (tractors, hay balers, chemical sprayers, bushogs, etc.) that a 300 head cattle operation requires, then it can be said that the larger cattle operation enjoys the benefits of:
economic depreciation
forward contracting
the law of diminishing returns
an economy of scale
Is the ability of your business to pay all its debts if it were sold tomorrow. _________ is important in evaluating the financial risk and borrowing capacity of the business.
Liquidity
Solvency
Profitability
Repayment Capacity
Which of the following is not an advantage of setting goals?
Makes it easier to get where you are going
Prepares you to meet the future
Gives purpose and direction to decisions and actions
Lack of confidence in trying to determine priorities
A ___________ is a historical record of monthly cash inflows and outflows for a specified period of time. This is usually for one year.
Net Worth Statement
Income Statement
Whole farm or ranch and detailed – enterprise analysis
Cash Flow Summary
Sweet corn has an expected yield of 175 bushels per acre and a production cost of $250 per acre. Expected market prices are $3.75 per bushel for corn and $9.00 per bushel for soybeans. Soybean production cost is $175 per acre. At what breakeven yield per acre would soybeans generate the same net return per acre as corn?
64.58 bushels
65.18 bushels
65.78 bushels
66.00 bushels
Farmer Bailey sold his 6,000 bushel soybean crop at several different times during the year. Bailey sold 1100 bushels at $7.50, 2300 bushels at $8.25, and 2600 bushels at $8.13. What was his average price per bushel?
$8.25
$8.06
$8.14
$8.75
A farmer purchases a 50 pound feeder pig for $0.56 per pound and plans to sell the pig at 245 pounds. The farmer estimates the total costs of gain to be $0.18 per pound. The nearest breakeven price when the pig is sold at 245 pounds is...?
$0.23 per pound
$0.29 per pound
$0.26 per pound
$0.31 per pound
If the total cost of producing 100 units of output is $500 and the average variable cost per unit is $4, then which of the following statements is true?
Total variable cost of the 100 units is $500
Total fixed cost is equal to $100
Average fixed cost is $4
All of the above
Economists use elasticities to relate the percentage change in one variable to the percentage change in another variable. The cross-price elasticity of demand estimates the impact on the demand for a good with respect to the change in the price of another good. A negative cross-price elasticity indicates the two goods are..?
Substitutes
Luxuries
Complements
Inferior
How many square feet are in an acre?
43,560
40,000
50,000
12,250
A farm business has a debt/worth ratio of 1:3. Its current liabilities total $30,000 and its non-current liabilities total $120,000. What is the value of its assets?
$450,000
$300,000
$550,000
$600,000
A feed store has sales of $510,000, product purchases of $275,000, other costs of $205,000, an opening inventory of $300,000, and a closing inventory of $280,000. What is the net income for this operation on an accrual basis?
5,000
10,000
20,000
30,000
If corn silage as fed contains 75% moisture and 2.8% protein, the dry matter would be what percent protein?
6.57
7.33
11.20
11.45
On March 1, 2010, Stan borrowed $25,000 to plant corn. On December 1, 2010, he repaid the $25,000 along with $1,500 interest. What annual interest rate did he pay?
5.5%
6.7%
7.5%
7.9%
A feedlot operator purchases a pen of 45 feeder steers with an average weight of 751 pounds and sells them at an average weight of 1203 pounds. Total feed cost for the pen is $16,789. Feed cost per pound of gain is equal to..?
$0.825
$0.912
$0.798
$1.211
A hectare equals...
1.42 acres
1.89 acres
2.47 acres
5.05 acres
The implicit cost of a farmer’s own labor is determined by:
The cost of food, clothing, and shelter
The price of the products sold
The potential wages in non-farm occupations
The cost of purchased inputs
Bacon and eggs are complements if the marginal utility of bacon is:
Increased by consuming eggs
Decreased by consuming eggs
Unaffected by the consumption of eggs
At its highest when egg consumption is zero
Fixed costs:
Do not increase during inflation
Do not change with the level of output
Only increase if the level of output increases
Decrease when the level of output increases
Which of the following is not an advantage of forming a LLC?
The liability of the members is decreased
LLC earnings flow through to the members avoiding a “company” tax
The LLC structure is more flexible than a corporate structure
LLC’s are exempt from labor laws set by the State
Suppose farmer Johnson buys a new cab tractor for $160,000. It has a useful life of six years and a salvage value of $40,000. What is the annual depreciation
using the straightline method?
$33,333
$16,000
$20,000
$22,000
When Jill sold her crossbred steer she received $1,350. She figured her total expenses to be $1075. The percentage net return realized was:
12%
25.5%
20.3%
79.6%
A forage producer uses a 75 Hp diesel tractor to operate a round baler in his hay operation. He estimates that he will put 375 hours on this tractor in the course of the year. If diesel prices are at $3.42/gal how much should his forage enterprise budget include for annual fuel cost?
$ 6540.75
$ 7695.00
$ 5525.50
$ 4232.25
Assuming the same Hp tractor, how much would gasoline have to cost per gallon in order for it to be as efficient to operate as a diesel?
$ 3.42
$ 3.12
$ 2.21
$ 3.84
The producer thinks that by using a bigger 100 Hp tractor, he could bale faster and shave hours off of his annual operating time. Assuming the price of diesel stays the same as in question
41, how much time would he have to save in order to begin saving money over the smaller tractor?
87 hours
122 hours and 15 minutes
93 hours and 45 minutes
21 hours and 30 minutes
A $75,000 loan amortized at 8% interest for 20 years yields annual payments of $7,635. How much of the first year's payment is principal?
$1,092.61
$1,635.00
$2,592.00
$4,000.00
For the above loan of $75,000, if the 20th and final payment includes $565.50 of interest, what was the outstanding principal balance after the 19th payment?
$5,688.00
$4,715.50
$4,622.75
$7,069.50
For the above loan of $75,000, how much total interest is paid over the life of the loan?
$101,852.20
$51,852.20
$43,000.00
None of the above
What is the gross cash income for this business?
$51,459
$79,165
$72,400
$71,575
What is the net cash income for this business?
$30,625
$31,600
$29,725
$37,700
What is the net income for this business?
$37,700
$38,215
$39,500
$37,315
If the owner worked in this business for 45 hours per week for 50 weeks, what is the return per hour for his work?
$13.32
$17.87
$19.11
None of the above
Renting farm land on shares of production rather than cash results in:
less risk for the landlord, more risk for the tenant.
more risk for the landlord, less risk for the tenant.
more risk for both the landlord and tenant.
less risk for both the landlord and the tenant.
The projected cash flow is useful in estimating:
credit needs.
depreciation.
return on assets.
profitability.
The elasticity of supply measures the response of a change in price on:
production.
consumption.
income.
quality.
An increase in the value of the U.S. dollar relative to the currency of other countries should result in
more costly imports to the U.S.
less costly imports to the U.S.
increased exports to the U.S.
no effect on imports or exports.
The main difference between cash and accrual accounting is that accrual accounting includes:
a charge for unpaid family labor.
depreciation.
adjustments for changes in inventory.
sales of capital assets.
The present value of $100 that will be received at the end of 1 year, given a 5% interest (discount) rate is:
$90.
$95.
$100.
$105.
The difference between a cash price at a particular location and a specified futures contract price is called:
margin.
basis.
option.
interest.
In preparing a cash flow plan, one should not include which expense items:
Machinery depreciation.
Cash paid for machinery purchases.
Principle payments on long term debt.
Family living and other non-farm expense.
If wheat and corn are common substitutes as an input into livestock feed, then an increase in the market price for corn is expected to:
Increase the demand for wheat.
Increase the demand for corn.
Create an excess demand for corn.
Decrease the quantity of corn supplied.
If we want to consider the time value of money in considering alternative farm investments, we should choose the investment with:
The highest net present value.
The most total profits over the lifetime of the investment.
The highest average profits over the investment lifetime.
The lowest cost.
If the government were to set the price of milk at an artificially high price, what is likely to occur.
A surplus.
A monopoly.
A shortage.
A slump.
There is a significant difference between which of these terms:
Inventory – goods on hand.
Inventory – goods on hand.
Hedging – speculating.
Total sales – gross sales.
The nearby hog futures contract closed at $49.80 with a local basis of $1.85. The local cash market was:
$47.95.
$49.80.
$50.00.
$51.65.
The funds available to purchase inputs and inventory items after the sales of current farm assets and payment of all current farm liabilities is known as:
asset turnover ratio.
capital replacement margin.
working capital.
debt to asset ratio.
The most important reason for a complete farm record keeping system should be:
to provide information for farm management decision-making.
to settle insurance claims.
to meet the requirement for reporting hired labor.
for income tax reporting.
A cost of production which does not vary with level of total production and includes items as depreciation, taxes, insurance, interest on investments is called:
a liability.
a variable cost.
total cost.
a fixed cost.
Liquidity is best described as:
the ability to meet cash obligations as they come due.
total assets minus total liabilities.
having no long-term debt.
the rate of capital turnover.
The difference between net worth and total assets is:
capital gain.
capital loss.
total liabilities.
net profit.
A business is “solvent” if total:
expenditures exceed total receipts.
assets exceed the total liabilities.
sales exceed total liabilities.
debt exceeds total equity.
Net worth is a measure of:
managerial ability.
financial position.
profitability.
liquidity.
Which of the following should be listed in the account book as the purchase of a capital asset?
herd sire.
fertilizer purchased in the fall.
registration fees for purchased calves.
new battery for the tractor.
A stated advantage of sole proprietorship compared to a corporation is:
limited liability.
greater resources.
fewer legal constraints.
continued operation after the death of an owner.
The major advantage of renting or leasing over purchasing land or machinery is to:
reduce income taxes.
release capital for other uses.
increase depreciation allowances.
improve output per worker.
Producers can diversify or specialize in their production. When producers diversify they are trying to manage some of their risk. When specializing they are:
increasing efficiencies in the enterprise.
reducing price risks of their products.
creating excess production in the market.
distributing labor requirements over the year.
In a free market, the role of price is to serve as a guide:
in the decision of what, when, and the quantity to produce.
in limiting demand.
in limiting supply.
in controlling consumption.
Forward contracting provides the farmer with:
greater flexibility at time of sale.
the possibility of speculating.
the possibility of hedging.
less price uncertainty.
At the beginning of last year, you had an outstanding loan for $90,000. The loan carries an interest rate of 12% annual percentage rate. You make one loan payment at the end of the year for $25,400. What is the outstanding balance at the beginning of this year?
$55,000
$64,600
$75,400
$79,200
When a farmer increases his investment in land, buildings, and equipment without increasing the total units of production, the cost per unit of production:
decreases.
increases.
varies with the operator.
remains the same.
Purchase of a call option on corn means:
the buyer is required to sell a corn futures contract at a set price.
The buyer may, but is not required to sell a corn futures contract at a set price.
The buyer may, but is not required to buy a corn futures contract at a set price.
The buyer is required to buy a corn futures contract at a set price.
Corn yields 90 bushels per acre and has a production cost of $140 per acre. Current market prices are $2.50 per bushel for corn and $6.00 per bushel for soybeans. Soybeans can be raised at a production cost of $110 per acre. At what breakeven yield per acre would soybeans generate the same net return per acre as corn?
25 bushels.
32 1⁄2 bushels.
37 1⁄2 bushels.
39 bushels.
The return an input would have earned in its best alternative use is called its:
fixed cost.
opportunity cost.
gross income.
total revenue.
It is profitable for a farmer to borrow money to expand his farm business when the borrowed money:
will increase volume of business.
can improve the level of production
can be secured at a low interest rate.
returns more than the cost.
A dollar received tomorrow can be worth less than a dollar today, because of:
inflation.
capital budgeting.
the time value of money.
taxation.
If a hedger is to carry a hedge through completion, the hedger:
will always make a profit.
must always deliver the hedged commodity to the local elevator.
must be prepared to meet all margin calls.
will take a higher risk.
A livestock producer wishing to use futures markets to hedge the price of cattle to be sold in the future would initially:
buy futures contracts expecting to sell the contracts when he sells his cattle.
buy futures contracts expecting to buy more contracts when he sells his cattle.
sell futures contracts expecting to buy them back when he sells his cattle.
sell futures contracts expecting to sell more contracts when he sells his cattle.
A feedlot operator purchased 100 feeder steers with an average weight of 700 pounds and sold them at an average weight of 1050 pounds. Total feed cost for the pen was $18,000. Feed cost per pound of gain was equal to:
$0.514
$0.600
$0.720
$0.810
An advantage of making an estate the beneficiary of a life insurance policy is to:
reduce estate tax liabilities.
decrease the size of the estate.
provide insurance protection to heirs.
provide liquid funds to satisfy tax liability.
Net farm income represents a return to what factors of production?
management, capital, paid labor, and unpaid labor.
management, capital, and unpaid operator and family labor
all land, total capital, and labor
equity capital and management
A banker loaning money to farm operators may require a cash flow analysis to:
determine the profitability of a farm operation.
collect data to complete the net worth statement.
reduce the farmer’s chance of obtaining a loan.
evaluate loan repayment potential.
Rate of return on investment for a farm business is calculated by:
dividing total assets by total liabilities.
subtracting total liabilities from total asset value.
dividing return to capital by average total assets.
dividing return to equity.
A legal document by which a property owner transfers the title of his land to someone to manage and safeguard for the benefit of beneficiaries is a:
trust.
partnership.
corporation.
sole proprietorship.
The producer of a commodity which has an inelastic demand knows that:
if less is produced by the industry, total industry revenue will increase.
if more is produced by the industry, total industry revenue will decrease.
if the price of the commodity increases, industry revenue will decrease.
the price of the commodity has no effect on the total industry revenue.
In developing an enterprise budget, crop insurance should be considered as:
a variable cost.
a fixed cost.
an opportunity cost.
an overhead cost.
Which of the following does not appear on the net worth statement?
value of livestock inventories
long-term liabilities
cash in the bank
net farm income
The process of finding the present value of a dollar to be received at some future date is known as:
compounding.
discounting.
forwarding.
ratio analysis.
Inflation means:
a dollar will buy more in the future than it will buy today.
the prices are which the interest rate will equal the inflation rate.
the farmer’s profit margin will increase over time due to higher prices.
the purchasing power of a dollar declines over time.
Given the limited corn supply, how many pounds of gain (at 3.8 to 1) can they get if they feed an 80-20 ration?
28,000 pounds
29,474 pounds
35,000 pounds
36,842 pounds
What is the feed cost per ton of feed using the 80-20 ration?
$92.85
$116.29
$163.15
$210.00
The Archers buy 175 feeder pigs weighing 50 pounds and plan to feed them to 260 pound market weight. What is their total feed cost with the 3.8 : 1 feed conversion ratio?
$2136.82
$6483.75
$8119.95
$9756.15
If costs $9756.15,
other than feed and pigs are $25 per pig, what is the breakeven selling price?
$39.77 per hundredweight
$40.03 per hundredweight
$40.42 per hundredweight
$40.92 per hundredweight
