WorksheetsNEW MEXICO FFA FARM BUSINESS MANAGEMENT CONTEST Part I
Total questions: 55
Worksheet time: 28mins
Which loan repayment schedule would cause you to pay the most interest?
Semi-annual
Monthly
Bi-monthly
Annual
Farmer Brown has wheat in her storage bins and decides that she does not want to absorb the risk that prices may decrease over the next few months. She could transfer that risk by:
Buying a put
Buying a call
Selling a put
Selling a call
Consumer demand for your production is determined by all of the following except:
The price of the product.
The price of substitute products.
The price of exclusionary products.
Quality of the product.
When a good or service is scarce, it means that:
We can't economize in our purchase of that good.
We have to forget about economics and buy everything that is available.
The economic system has failed to operate properly.
None of the above.
When governments restrict entry of new businesses into industry, the effect in that industry is to:
Increase competition and reduce economic profit.
Reduce competition and increase economic profit.
Reduce both competition and economic profit.
Increase both competition and economic profit.
The fact that the actual price paid for Fords is very close to the actual price of comparable models of Chevrolets is evidence that:
The firms producing these cars are colluding to set price.
The firms producing these cars have no control over price at all.
Consumers regard these cars as close substitutes for one another.
All of the above.
If there is a surplus of a product in a competitive market, we can infer that the market price:
Is below the equilibrium price.
Is controlled by a government-mandated price freeze.
Is above the equilibrium price.
Has been fixed by firms acting in collusion.
A security agreement reduces the risk of a loan for:
A: A borrower.
B: The salesman.
C: The lender.
D: Internal Revenue Service.
The time period which is short enough that the firm is able to vary the quantities of some (but not all) of its resources is called:
The long run.
The short run.
A period of constant returns.
None of the above.
Another term which has the same meaning as owner's equity is:
Net worth.
Net farm income.
Total asset value.
Total liabilities.
Operators of a farm business face several different types of risk. Indicate the type of risk that can be managed by increasing cash reserves.
Production risk
Marketing risk
Financial risk
Legal risk
When total output of good X is maximum in the short run:
Marginal cost is minimum.
Marginal revenue is maximum.
Marginal physical product is zero.
Production of good X is not efficient.
Pork is said to be inferior in the southeastern U.S. but a normal good in the midwest. This is in reference to:
Price elasticity of demand.
Cross elasticity of demand.
Unitary elasticity of demand.
None of the above.
Which of the following statements is NOT one of the three tests the Internal Revenue Service applies when looking at prepaid farm expenses?
The expenditure must be a payment, not a deposit.
The farmer must not be using the cash basis method of accounting.
The payment must not materially distort the farmer's income.
The payment must have a valid business purpose and not be made to avoid taxes.
Coops are formed to:
Provide a service other businesses would not.
Counter monopoly power.
Provide better services than other businesses.
All the above.
One of the best measures of financial progress over a period of years would be:
Income tax paid.
Capital investment.
Net cost income.
A series of balance sheets.
A livestock producer, wishing to use futures markets to hedge the price of cattle, would at the time of his cattle purchase: A: Buy futures contracts expecting to sell the contracts when selling cattle. B: Sell futures contracts expecting to sell more contracts when selling cattle. C: Sell futures contracts expecting to buy the contracts when selling cattle. D: Buy futures contracts expecting to buy more contracts when selling cattle.
Buy futures contracts expecting to sell the contracts when selling cattle.
Sell futures contracts expecting to sell more contracts when selling cattle.
Sell futures contracts expecting to buy the contracts when selling cattle.
Buy futures contracts expecting to buy more contracts when selling cattle.
A livestock producer wishing to use futures markets to hedge the price of grain to be purchased in the future would initially:
Buy futures contracts expecting to sell the contracts when he buys the grain.
Buy futures contracts expecting to buy more contracts when he buys the grain.
Sell futures contracts expecting to buy them back when he buys the grain.
Sell futures contracts expecting to sell more contracts when he buys the grain.
Changes in short-run total costs result from changes in only:
Variable costs.
Fixed Costs.
Demand.
Price elasticity of demand.
The location or shape of the marginal cost curve: A: Is dependent on the location or shape of the AFC curve. B: Is a consequence of increasing and diminishing returns. C: Will be rising when there is a rising marginal product. D: Is horizontal when marginal product is zero.
Is dependent on the location or shape of the AFC curve.
Is a consequence of increasing and diminishing returns.
Will be rising when there is a rising marginal product.
Is horizontal when marginal product is zero.
Which of the following is the primary purpose of a current ratio?
To determine net worth.
To include it on your tax return.
To determine your ability to meet immediate financial obligations.
To aid in evaluating your farm profitability.
One important function performed by prices in a free market system is to:
Ration available goods and services.
Insure a profit to all productive firms.
Discourage foreign competition.
Reduce interdependence within an economy.
Planning should be done to:
Keep the boss off your back.
Know what is expected of you.
Place the firm in the best position for the future.
Figure how to make the most money.
The change in total cost for a one-unit change in output is:
Average fixed cost becomes zero.
Average variable cost.
Marginal physical product.
Marginal cost.
Net farm income from operations is:
Difference between cash revenue and cash expenses.
The excess of receipts over payments to all factors of production.
Return to unpaid family and operator labor, equity capital and management.
Return to unpaid family and operator labor, debt capital and management.
The best description of a business which has increased its debt/asset ratio is one which has:
Purchased more assets.
Sold some assets.
Increased its debt.
Increased its debt relative to total assets.
Returns paid to members of a cooperative based on volume of business transacted is:
Dividend
Discount
Patronage refund
Interest
Agricultural options are heavily regulated to:
Avoid misuses
Avoid price fixing
Ensure the investor knows the risk of trading options
All of the above
The number of acres of wheat to be grown this year is projected to be down and some think we could run out of wheat before the next crop. Bill has already forward contracted his wheat for this year, how could he possibly take advantage of the possible shortage?
Sell a call option
Purchase a call option
Sell a put option
Purchase a put option
The market demand curve for the output of a single competitive firm is:
Vertical at the equilibrium market quantity.
Horizontal at the prevailing market price.
Down-sloping to the right.
Upward-sloping to the right.
An advantage of a projected cash flow budget is that:
It lets you plan purchases.
It shows when excess cash will be available.
It lets you evaluate relationships of short-term debt to repayment capacity.
All of the above.
Crop insurance, hedging, options, and liability insurance provide a means of:
Increasing profits.
Increasing working capital.
Reducing risks.
Lowering costs.
The type of insurance which builds up a cash value and which may be used as a source of loans to policy holders is:
Whole life insurance.
Crop insurance.
Term insurance.
Property insurance.
If a hedger is to carry a hedge through to completion, the hedger: A: Will always make a profit. B: Must always deliver the hedged commodity to the local elevator. C: Must be prepared to meet all margin calls. D: Will take a higher risk.
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.
Specialization in crops or livestock in a farm business tends to:
Increase income and increase risk.
Decrease income and increase risk.
Decrease risk and increase income.
Decrease risk and decrease income.
Farmer cooperatives in the United States: A: Have generally been organized to carry out a business operation under farmer-member control. B: Have been most successful as large regional or national bargaining associations. C: Tend to conform to the model of pure competition rather than oligopoly and oligopsony. D: Generally have more than half of the total market share in both farm service supply and processing marketing industries.
Have generally been organized to carry out a business operation under farmer-member control.
Have been most successful as large regional or national bargaining associations.
Tend to conform to the model of pure competition rather than oligopoly and oligopsony.
Generally have more than half of the total market share in both farm service supply and processing marketing industries.
The difference between a cash price at a particular location and a specified futures contract price is called:
Margin
Basis
Option
Interest
The financial ratio that shows how much of gross farm income is retained in net farm income is:
Operating expense ratio.
Income expense ratio
Interest expense ratio.
Net farm income from operations ratio.
Which of the following are the profit increasing changes on a partial budget?
A: Additional costs and additional revenue.
B: Reduced costs and reduced revenue.
C: Reduced costs and additional revenue.
D: Additional costs and reduced revenue.
A farmer has an average fixed cost of $12 per acre on land planted to corn. Assuming that the variable cost required to produce one bushel of corn remains the same, if the farmer increases corn production per acre he will:
Lower the per bushel cost of producing corn.
Increase the per bushel cost of producing corn.
Not affect the per bushel cost of producing corn.
Decrease the variable costs of producing corn.
A cattle feeder has bought some feeders and placed them on feed. He plans to bring them out of the feedlot as fed cattle in about 150 days. He only has enough grain storage for 50 days, so he decides to hedge his future grain purchases. He would:
Short hedge.
Long hedge.
Can't hedge.
None of the above.
Which of the following would NOT be recorded when using a single entry, cash accounting system?
Charging $2,000 worth of chemicals at the farm supply store.
Billing a neighbor $850 for baling hay.
Recognizing that $3,476.34 of interest has accrued since the last interest payment.
All of the above.
If you hedge and are long in the futures market and prices decrease, you:
Must offset.
Go home.
Have a paper loss.
Have a paper profit.
The selling of a commodity futures contract to protect a producer from price fluctuations in the marketplace at the time the product is sold. Insures against substantial loss, but also prevents windfall gains.
Futures contract
Hedging
Basis
Options
The chain of command for a federated cooperative is: A: From the local to the regional. B: From the regional to the local. C: From the national to the regional. D: None of the above.
From the local to the regional.
From the regional to the local.
From the national to the regional.
None of the above.
Compute the payments for the first and second years under the equal total payment method and under the equal principal payment method. Under the equal total payment method, the principal portion of the first payment is: _______
the principal portion of the first payment
the interest portion of the first payment
the total payment of the first year
the principal portion of the second payment
Compute the payments for the first and second years under the equal total payment method and under the equal principal payment method. Under the equal total payment method, the interest portion of the first payment is: _______
interest portion of the first payment
principal portion of the first payment
total payment of the first year
total payment of the second year
Compute the payments for the first and second years under the equal total payment method and under the equal principal payment method. Under the equal total payment method, the remaining principal balance after the first payment is: _______
the remaining principal balance after the first payment
the total interest paid after the first payment
the total principal paid after the first payment
the total amount paid after the first payment
Compute the payments for the first and second years under the equal total payment method and under the equal principal payment method. Under the equal total payment method, the total second payment is: _______
total second payment
total first payment
equal principal payment
equal interest payment
Compute the payments for the first and second years under the equal total payment method and under the equal principal payment method. Under the equal principal payment method, the principal portion of the first payment is: _______
the principal portion of the first payment
the interest portion of the first payment
the total payment of the first year
the principal portion of the second payment
Compute the payments for the first and second years under the equal total payment method and under the equal principal payment method. Under the equal principal payment method, the remaining principal balance after the first payment is: _______
remaining principal balance after the first payment
total payment for the first year
total payment for the second year
interest payment for the first year
Compute the payments for the first and second years under the equal total payment method and under the equal principal payment method. Under the equal principal payment method, the total second payment is: _______
total second payment
total first payment
total third payment
total fourth payment
What is the Net Farm Income?
Net Farm Income is the total revenue from farm operations minus the total expenses incurred in those operations.
Net Farm Income is the total expenses from farm operations minus the total revenue generated.
Net Farm Income is the total revenue from farm operations without considering any expenses.
Net Farm Income is the total profit from non-farm activities.
What is the Operating Expense Ratio?
A measure of what it costs to operate a piece of property compared to the income that the property brings in
A ratio used to determine the profitability of a company
A metric for evaluating the efficiency of a company's supply chain
A financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets
What is the Operating Profit Margin Ratio?
Complete an accrual income statement using the information below. Then answer question 13-16.
The ratio of operating profit to net sales.
A measure of a company's operational efficiency.
The percentage of revenue that exceeds the costs of goods sold.
