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Worksheets2024 Tarleton FBM Written
Total questions: 100
Worksheet time: 50mins
SECTION 1: Mark Your Answers on the TOP of the Answer Sheet — Standardization of farm financial ratios and accounting practices will help farm managers:
compete with nonfarm businesses for capital
summarize their account books in less time
pay less income tax
manage hired employees more effectively
SECTION 1: Mark Your Answers on the TOP of the Answer Sheet — A short summary of why a particular business is in operation is called:
internal scanning
external scanning
mission statement
whole farm plan
SECTION 1: Mark Your Answers on the TOP of the Answer Sheet — The term describing how much time is available to make a decision is
imminence
revocability
frequency
importance
SECTION 1: Mark Your Answers on the TOP of the Answer Sheet — Short-run planning is more important than long-run planning.
True
False
SECTION 1: Mark Your Answers on the TOP of the Answer Sheet — "Define the problem" is the first step in the decision-making process.
True
False
SECTION 1: Mark Your Answers on the TOP of the Answer Sheet — All managers have the same goal(s).
True
False
SECTION 1: Mark Your Answers on the TOP of the Answer Sheet — Selling grain from storage would be which type(s) of farm business activity?
operating
investment
financing
operating and investment
SECTION 1: Mark Your Answers on the TOP of the Answer Sheet — When something is purchased and paid for in a year before it will be used to produce income it is called a(n)
accrued expense
account payable
prepaid expense
account receivable
SECTION 1: Mark Your Answers on the TOP of the Answer Sheet — Which of the following is an example of a noncurrent liability?
farm machinery
loan on feeder livestock
loan on farm machinery
prepaid expense
Another name for a balance sheet is
net worth statement
income statement
statement of owner equity
statement of cash flows
The proper term for the value found by subtracting accumulated depreciation from the asset's original cost is
salvage value
market value
book value
use value
The depreciation method with the smallest annual depreciation in the first year of life is
straight line
double declining balance
150% declining balance
all depreciation methods have the same first-year depreciation.
A current ratio greater than two indicates a business has good liquidity.
True
False
A trend analysis for a farm business could be performed using what kind of data for comparison?
historical data from the same farm for the past five years
data from comparable farms in the same region for the same year
expected results from a whole farm budget completed at the beginning of the year
historical data from similar farms in the same region for the past five years
The debt/asset ratio and the debt/equity ratio both measure the overall solvency of the farm business.
True
False
A production function is in the amount of physical product obtained with different:
levels of input
output prices
input prices
ratios of input and output prices
MPP can never be negative.
True
False
An increase in the slope of a production possibility curve will:
cause the substitution ratio to increase
cause the substitution ratio to decrease
have no effect on the substitution ratio
change the price ratio
Doubling both input prices does not change the price ratio.
True
False
The marginal cost curve:
will eventually increase as output is increased
will eventually decrease as output is increased
is constant regardless of output level
has the same shape as a marginal revenue curve
AFC is constant as output increases.
True
False
Which of the following would be a fixed cost on a typical crop enterprise budget?
land charge
machinery repairs
labor expense
harvesting expense
Ownership or fixed costs for farm buildings include all of the following except
depreciation
insurance
utilities
interest on the investment
Some enterprises may have more than one source of revenue.
True
False
A whole-farm budget contains:
costs, returns, and resource needs for a specific set of enterprises
costs and returns that would be affected by a specific management change
projected costs and returns for one unit of a specific enterprise
the actual costs and returns that were realized during one year for all the enterprises on a farm
Changing from one whole-farm plan to another may require several transitional years in which net income and cash flow are different than in a typical year.
True
False
If a resource in a linear programming formulation is not used up entirely by the selected activities, then the shadow price on the resource constraint will be zero
True
False
A partial budget is an appropriate tool for analyzing
the expansion of an existing enterprise
the profit or loss from a single enterprise
the cash flows in the business
the startup costs in a new business
Most partial budgets will need to include some opportunity costs.
True
False
When preparing a cash flow budget it is important to
take into account the timing of cash inflows and outflows
include all noncash expenses
include only noncash revenues
omit family living expenses and other personal withdrawals
A cash flow budget can be used to analyze the feasibility of a new capital investment.
True
False
In a joint operating agreement, gross income is shared in proportion to each person's contribution to:
total labor
total costs
total assets
total liabilities
Only one person can provide the management in a sole proprietorship.
True
False
A parent and a child who set up separate farming operations might still find it advantageous to own certain assets jointly.
True
False
When “placing a hedge” for a commodity held in storage for later sale, a farmer does so by:
buying a futures contract
selling a futures contract
buying crop insurance
signing a contract with a local elevator
Commodity options essentially allow a producer to pay a premium to establish a minimum or maximum price for a commodity.
True
False
An advantage of the accrual method of computing taxable farm income over the cash method is:
the result is a better indicator of true net farm income than values obtained from using the cash method
lower marginal tax rates are used
taxable income will always be less
the amount of taxable income that is reported in each tax year can be adjusted more easily
Section 179 expensing increases the total amount of deductions from the purchase of a depreciable asset over the long run.
True
False
A net present value of zero means the investment has an internal rate of return
greater than the discount rate
less than the discount rate
exactly equal to the discount rate
equal to zero
A financial feasibility analysis looks at the
net present value of the investment
internal rate of return for the investment
payback period for the investment
net cash flows resulting from the investment and its financing
Income taxes can affect the profitability of an investment.
True
False
An example of “debt restructuring” that would improve a farmer’s cash flow in the short run is:
lengthening the repayment period of a large loan from 3 years to 10 years
making payments on amortized loans with funds borrowed on a line of operating credit
consolidating several small loans into one larger one
shortening the repayment period of a loan from 10 years to 3 years
The advantage of a “balloon payment” loan over a conventional loan repayment plan is:
less total interest is paid
the size of the payments is flexible
the payments are smaller, except for the final one
the interest rate is flexible
Changes in asset values due to inflation affect the solvency of a business more than its liquidity.
True
False
One advantage that owning farmland has over leasing is:
labor and machinery are used more efficiently
owner equity could increase if land values go up
the number of acres farmed is more flexible
less capital is tied up in long-term investments
The fact that the supply of farmland in the United States is essentially fixed makes land prices and rental rates less responsive to changes in crop prices and production technology than prices of variable inputs such as pesticides.
True
False
One measure of labor efficiency on a farm is:
total labor cost for the year
average hourly wage paid
value of farm production per person-year
total number of person-years of labor used
Evaluation meetings with farm or ranch employees should be held:
whenever a problem arises
when an employee resigns
on a regularly scheduled basis
with all employees present together
The cost of housing provided to a farm employee can be a tax-deductible expense for the employer.
True
False
Only actual field time should be considered when labor costs for machinery are calculated.
True
False
Globalization refers to the process of:
reducing trade barriers among countries
protecting a country's farmers by taxing competing products from other countries
a gradual rise in the average temperature of the earth
countries producing a greater variety of agricultural products for their own needs
Which of the following is an example of a tactical decision?
balancing a livestock ration
forming a partnership with a relative
joining a feeder pig cooperative
installing an irrigation system
Goals must be known before management decisions can be made.
True
False
Completing all steps in the decision-making process will guarantee a perfect decision.
True
False
When using cash accounting which of the following accounts would never be used?
grain sales
depreciation
fertilizer purchases
accounts payable
Good farm records can be useful when applying for a farm loan.
True
False
Changes in inventory values are not included in a cash accounting system.
True
False
Which of the following best describes a balance sheet?
it shows changes in assets and liabilities over the last accounting period
it shows changes in assets and liabilities over a period of time
it shows assets and liabilities at a point in time
it shows profit for the last accounting period
The "cost value" shown on a balance sheet for an asset such as a tractor is equal to
the original purchase price
the original purchase price less depreciation expense taken to date
the original purchase price plus cost all repairs to date
the cost of a new tractor of the same size
If total asset value increases, owner equity will also increase.
True
False
A negative owner's equity indicates an insolvent business.
True
False
The Farm Financial Standards Council recommends only two classes of assets, current and noncurrent.
True
False
On a cost basis balance sheet, owner equity will increase if land values increase.
True
False
It is possible for an asset to have a $0 salvage value.
True
False
The degree to which a farm's assets adequately secure its debts is referred to as:
liquidity
solvency
efficiency
profitability
If a farm has zero liabilities, the ROA and ROE will be the same.
True
False
If the purchase price of an input decreases, a profit maximizing farmer should
use more input and produce more output
use more input and produce less output
use less input and produce more output
use less input and produce less output
When average physical product (grain yield per acre, for example) begins to decrease, you should stop adding more fertilizer.
True
False
The combination of feed ingredients in a least-cost feed ration depends on all the following except:
relative prices of the ingredients available
substitution rates between the ingredients available
selling price of the livestock
the nutritional requirements of the livestock
A production possibility curve shows all possible combinations of two inputs that will produce a given amount of output.
True
False
There are increasing returns to size whenever increasing the output of the business results in:
a larger average cost per unit of output
a smaller average cost per unit of output
the same average cost per unit of output
increased total profit
Labor can be either a cash expense or an opportunity cost.
True
False
On a breeding livestock enterprise budget, if replacement females are assumed to be raised on the farm or ranch,
an expense item for their depreciation should be shown
the number of young females sold should be reduced
the cost of buying replacements should also be included
income from the sale of cull breeding animals can be ignored
For a given total cost, the higher the yield, the lower the break-even price.
True
False
If fixed costs on an enterprise budget were to increase, the market price needed to break even would increase.
True
False
When developing a whole-farm plan the inventory of resources should include labor and management skills as well as physical resources.
True
False
Linear programming assumes that resource requirements per unit of an enterprise increase as more units of the enterprise are carried out.
True
False
Which of the following are the profit decreasing changes on a partial budget?
additional costs and additional revenue
additional costs and reduced revenue
reduced costs and additional revenue
reduced costs and reduced revenue
A partial budget includes only those costs and revenues which will change if the proposed alternative is adopted.
True
False
Fixed costs are never included on a partial budget.
True
False
A cash flow analysis of an investment in a new capital asset should include projections for
several months
one year on a monthly basis
one year on an annual basis only
several years
A cash flow budget should include the total amount of cash received from the sale of a tractor.
True
False
A parent and child who were starting to farm together would most likely double the size of their milking parlor if their ultimate goal was to end up with:
a "spin-off" operation
the parents retiring in a few years and renting the farm to the child
a family farming corporation with both parent and child active
When comparing the contributions of each party in a joint operating agreement, resources such as owned machinery or land should be valued at their market or sale value rather than their annual ownership cost.
True
False
Most farmers are more likely to accept a risk if
Only a small possible loss is involved
They have a high debt to asset ratio
They have high fixed cash flow obligations
They are primarily concerned with maintaining their net worth
Weather is an important source of production risk for crop producers.
True
False
Revenue insurance protects against both low yields and low prices.
True
False
Sales of crops and feeder livestock are usually taxed as both ordinary income and self employment income.
True
False
Income that qualifies as a capital gain is also subject to self-employment tax.
True
False
Any investment that has a positive net present value will also be financially feasible.
True
False
If a positive rate of inflation is expected, the real discount rate is smaller than the nominal discount rate.
True
False
The largest source of nonreal estate farm credit in the U.S. is
commercial banks
Farm Credit System
merchants and dealers
insurance companies
"Capital" includes machinery and livestock as well as cash.
True
False
Crop share leases are based on the principle that gross income should be shared in the same proportion as
total cash costs
total variable costs
total fixed costs
total economic costs
Owning farmland rather than renting it generally gives the operator more management freedom.
True
False
A good incentive plan for farm employees should
shift some price risk to the employee
be based on factors over which the employee has control
be paid only once a year
account for over half of the employee's total compensation
_____ allows agricultural employers to hire legally foreign workers for temporary or seasonal work if there is a verifiable shortage of domestic workers available for these tasks:
Section H-2A of the Immigration Reform and Control
Section 43 of the Social Security Act
The U.S. Migrant and Seasonal Agricultural Worker Protection Act
The Occupational Safety and Health Act (OSHA)
One advantage of custom hiring machinery operations over owning your own machine is
it is more convenient
it requires less investment capital
depreciation deductions help reduce taxes
you have more control over the quality of work performed
Field efficiency would probably be highest for which operation
combining
planting
spraying
plowing
The most important factor in deciding when to replace machinery should be the amount of income tax that can be saved in the year of purchase.
True
False
