AZ FFA AG BUSINESS CDE 2017

Renting farm land on shares of production rather than cash results in:

more risk for the landlord, less risk for the tenant.

The projected cash flow is useful in estimating:

credit needs

The elasticity of supply measures the response of a change in price on:

production

An increase in the value of the U.S. dollar relative to the currency of other countries should result in:

less costly imports to the U.S

The main difference between cash and accrual accounting is that accrual accounting includes

adjustments for changes in inventory.

The present value of $100 that will be received at the end of 1 year, given a 5% interest (discount) rate is:

$95

The difference between a cash price at a particular location and a specified futures contract price is called

basis

In preparing a cash flow plan, one should not include which expense items:

Machinery depreciation

If demand and supply increased equally for an agricultural product, the results would be:

An increased quantity will be sold at the same price.

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

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.

If the government were to set the price of milk at an artificially high price, what is likely to occur.

A surplus.

A farmer has total assets of $500,000 of which land is $300,000. The farmer's debt : equity ratio is 1.0. What will the farmer's debt : equity ratio be if the lender devalues the land by 30%?

1.22

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:

working capital.

The most important reason for a complete farm record keeping system should be:

to provide information for farm management decision-making.

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 fixed cost

Liquidity is best described as:

the ability to meet cash obligations as they come due.

The difference between net worth and total assets is:

total liabilities.

A business is "solvent" if total:

assets exceed the total liabilities.

Net worth is a measure of:

financial position.

A stated advantage of sole proprietorship compared to a corporation is:

fewer legal constraints

The major advantage of renting or leasing over purchasing land or machinery is to:

release capital for other uses.

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.

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

Forward contracting provides the farmer with:

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

When a farmer increases his investment in land, buildings, and equipment without increasing the total units of production, the cost per unit of production:

increases

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?

32 ½ bushels

The return an input would have earned in its best alternative use is called its:

opportunity cost.

If a hedger is to carry a hedge through completion, the hedger:

must be prepared to meet all margin calls.

Accrued interest on a balance sheet refers to:

interest that has accumulated since the last loan payment

A livestock producer wishing to use futures markets to hedge the price of cattle to be sold in the future would initially:

sell futures contracts expecting to buy them back 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

An advantage of making an estate the beneficiary of a life insurance policy is to:

provide liquid funds to satisfy tax liability.

Net farm income represents a return to what factors of production?

management, capital, and unpaid operator and family labor

A banker loaning money to farm operators may require a cash flow analysis to:

evaluate loan repayment potential.

Rate of return on investment for a farm business is calculated by:

dividing return to capital by average total assets.

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.

The producer of a commodity which has an inelastic demand knows that:

if less is produced by the industry, total industry revenue will increase.

In developing an enterprise budget, crop insurance should be considered as:

a variable cost.

Which of the following does not appear on the net worth statement?

net farm income

The process of finding the present value of a dollar to be received at some future date is known as:

discounting

Inflation means:

the purchasing power of a dollar declines over time

The cost of producing one additional unit of output is called:

marginal cost

A measurable point where an increase in the addition of a variable cost item decreases the actual output of an enterprise is referred to as

diminishing returns

Opportunity costs are:

the cost of using a resource in one way based on the return that could be obtained from using it in the best alternative way

Which of the following is not a fixed cost?

fertilizer

Bill knows that corn yield peaks at about 150 bushels with approximately 125 units of fertilizer in his county. He also knows he can produce 25 bushels of corn without fertilizer. With this information, Bill knows that:

anything more than 125 units of fertilizer would be wasted

The demand curve shows the relationship between:

price and the quantity demanded

The percent change in quantity divided by the percent change in price is defined as:

elasticity

An estimate of monthly cash inflows and outflows is a:

cash flow projection

One of the best measures of liquidity is:

current ratio

A business is solvent if:

total assets exceed total liabilities

An enterprise budget:

All of the answers listed

If the variable operating costs of Lisa's watermelon production is $334.57 and the yield is 7 tons, what is Lisa's break-even price per ton?

$47.80

A step-by-step process for identifying all the costs and returns that change due to alterations in one or more of the production processes is a(n):

partial budget

A contract calling for delivery of a carefully described commodity at some later time period is a(n):

futures contract

A legal statement of a person's wishes concerning the disposal of property after death is a(n):

will

If a farmer's equity is $560,000 and his liabilities are $270,000, his debt-equity ratio is:

0.48

Jason borrowed $1,000 from the bank at 8% interest. He is to make a lump-sum payment at the end of the year. If simple interest is used, what is the total amount he will pay

$1,080

Goals that can be achieved in less than one year and usually provide immediate satisfaction are:

short-term goals

A factor that will help determine priorities of goals is

All of the answers listed

The accounting system that keeps balance in financial transactions is:

double entry accounting

Ann made $41,303 profit on her nursery operation last year. Her capital investment was $216,108. What was her rate of return to capital invested?

19%

A budget for corn would be a(n):

enterprise budget

A decline in the value of an asset over its useful life associated with use, age and obsolescence is:

depreciation

Net cash income is:

gross receipts minus cash expenses (operating and fixed)

The purpose of insurance is to:

reduce risk and uncertainty

The coordination of activities that are involved with the moving of a commodity from the producer to the ultimate consumer is:

marketing

Planning the acquisition, enjoyment and distribution of property for the benefit of their family is a(n):

estate plan

A spouse who works for the other spouse has to pay social security taxes

FALSE

Hedgers and speculators in the futures market are different in that...

speculators do not produce a product to sell.

Speculators in the futures market...

accept the price risk the hedgers are seeking to avoid.

The total quantity of goods and services produced is called...

supply.

A plan that projects expected returns and costs is called a...

budget.

A producer most often uses a cash flow statement to...

estimate the amount of credit needed and when it will be needed.

Suppose farmer Johnson buys a new cotton picker 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 straight-line method?

$20,000

Returns to unpaid operator and family labor, equity capital, and management is:

net farm income.

Which of the following is NOT a variable cost?

depreciation

A business that is owned and controlled by one person is a:

sole proprietorship

The ability of a business to pay off liabilities without disrupting business is termed:

liquidity

An agreement to buy and receive or to sell and deliver a commodity at an upcoming date with certain specified characteristics is a:

futures contract.

If demand for a product goes down and all other factors remain the same, then the price of that product will probably:

decrease

If the price of a product increases and the demand does not change, the demand for the product is said to be:

inelastic

Suppose John Brown has 100 acres of cropland. He wants to plant it in corn and soybeans. To decide what ratio of corn and beans will give him the most returns he should use a:

partial budget.

An advantage of a farm corporation is that:

it limits liability of the owners.

Ann knows that she will need $100,000 for living expenses when she retires in 20 years. She used __________ to determine how much she needs to invest today at 10% interest to accumulate the needed funds.

discounting

Which of the following should not be depreciated?

land

With which method of record keeping is it easiest to determine the net farm income and analyze the strong and weak points of an agricultural business from year to year?

accrual method

Mr. Brown is the owner of the local hardware store. He does not farm but likes to buy and sell in the futures market. He is a...

speculator.

If all other factors remain the same and the supply of a product goes up, then the price of that product will probably...

fall.

Which items are least readily converted into cash without loss?

fixed or long term assets

A document that shows the exact size, location, ownership, and method of ownership of property is a...

deed.

Cash flow summaries, net worth statement, income statement, and detailed enterprise analysis are all forms of:

records

A cash-flow projection is defined as:

an estimate of monthly cash inflows and outflows over a period of time.

When the price of a product is increased with no change in factors other than price, less product will be purchased. This is the:

Law of Demand.

Money that is owed to you at the end of the year is termed:

accounts receivable

_____________ are the cash value of assets based on actual cost or market value less sale expenses.

Current values

Failure to comply with the terms of a contract is known as:

Breach of contract