Farm and Ranch Test 1

Specialty producers

niche markets, feedyards, ag tourism

steps to tactical decion making

identify problem, potential solutions, collect data, analyze alternatives, implement, monitor results, accept responsibility

why do we do record keeping

inventory, tax purposes, reconciliation, profit and loss, new investments, obtain loans

current assets

turned into cash in 12 months or less without disrupting business

intermediate asset

held for several years, depreciates in value, will be replaced

current ratio range

2.0 or greater- green light
1.1 - 1.9- yellow light
1.0 or less- red light

market basis

shows what your business is worth but must be updated every year

low volume high margin producer

sells a small quantity but for a higher price

Decisions managers make day to day

marketing, customer base, location, HR, investments

5 things that affect how decisions are made

technology, information, operational needs, employees, consumer concerns/demands

4 primary functions of a manager

planning, implementation, control/analyze, make adjustments

steps to strategic decision making

understand the mission
make goals
assess the resources of your business
survey the business environment
implementation

tactical decisions

day to day decisions

characteristics of decisions that determine time spent

importance, frequency, imminence, revocability, number of alternatives

capital gains tax

if you sell an asset for more than the purchase price
0-15-20%

solvency

ability to pay all liabilities with assets owned

debt to asset ratio range

less than 40%- green light
40-49%- yellow light
50% or more- red light

how to increase net worth in cost market basis

have profits

APH

Actual Production History

High volume low margin producer

sells a lot of an item for a cheap price

part time operators

have a job outside of farming operation

Strategic decisions

long term, organizational decisions

SMART

Specific, measurable, attainable, rewarding, timed

decisions unique to ag

perfect competition, weather, land availability, small size

long term asset

held for several years with expected future benefits

current liabilities

12 months or less to pay back

intermediate liabilites

1-7 years to pay back

long term liabilities

7 or more years to pay back

deferred taxes

taxes that you would have to pay if you sell something

current deferred taxes are also called....

income taxes

noncurrent deferred taxes are also called.....

capital gains tax

solvency is determined by:

net worth and debt to asset ratio

debt to asset ratio

total liabilities/total assets

Liquidity

ability to pay obligations as they come due

liquidity is determined by....

working capital and current ratio

working capital equation

current assets-current liabilities

Current ratio equation

current assets/current liabilities