Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question.
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| 1. | Which is not a likely source
of funds for short term (less than three years) loans? a. | Federal land bank | b. | Commercial Bank | c. | Farmers Home Administration | d. | All of the above are good sources of short-term
credit | | |
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| 2. | Johnny was listing his
assets for a bank loan. Which item below should be listed with his assets? a. | marriage certificate | b. | farm truck | c. | hourse mortgage | d. | his outstanding loan from the credit union | | |
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| 3. | A good reason for keeping
good records is... a. | for income tax purposes | c. | to obtain credit | b. | to determine profitability | d. | all the above | | | | |
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| 4. | The people below have their
current ratio of assets to liabilities listed beside their name. Based solely on this ratio
which would you most likely lend money to? a. | Thomas 6:1 | c. | Nancy 3:1 | b. | Helen 1:1 | d. | Frank 1:6 | | | | |
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| 5. | At what age will term life
insurance cost a person the most? a. | 25 years | c. | 45 years | b. | 30 years | d. | 55 years | | | | |
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| 6. | Mr. A has the following
investments:
$60,000 in Certificates of Deposit
$10,000 in U.S. Savings
Bonds
$10,000 in his Bank Savings Account
What can be said about Mr.
A? a. | he has high yielding investments | c. | he has very safe investments | b. | he is a fairly wealthy man | d. | all the above | | | | |
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| 7. | A friend borrows $2,000 and
agrees to repay you at the end of three months. The interest is to be calculated at 12% per
year compounded monthly. What is the total amount he/she will owe at repayment
time? a. | $2,60.60 | c. | $2,240.00 | b. | $2,040.40 | d. | $2,020.00 | | | | |
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| 8. | Joe's total cost for his
strawberry operation this year was $800.00. If his gross receipts totaled $2,400.00, what was
his percent return to investment?
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| 9. | Which is considered a fixed
asset? a. | savings account
balance | c. | wheat on hand | b. | land | d. | sows for breeding | | | | |
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| 10. | Suppose the price of pork
and beef at the supermarket doubles. What is a likely related occurance? a. | less pork and beef will be consumed | c. | more poultry will be consumed | b. | the price of poultry will rise | d. | all the above | | | | |
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| 11. | Who is at the greatest
risk? a. | the first mortgage holder | c. | the third mortgage holder | b. | the second mortgage holder | d. | all are approximately equal at risk | | | | |
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| 12. | Thomas is a poultry producer
for Gold Kist. I can purchase all the dressed chickens (originally from Thomas's farm) my
family needs at the supermarket cheaper than I can raise and dress them myself. This can be
explained by the
theory. a. | ammortization | c. | cost
maximization | b. | economies of scale | d. | price reduction | | | | |
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| 13. | Pam has determined that she
will lost money on cabbage this year. Given the following information, what is your
advise?
Fixed cost per bag - $4.00
Variable cost per bag - $2.00
Price received per bag -
$5.00 a. | don't produce this year | b. | produce if no alternative crop is available | c. | produce only half your potential | d. | produce only one quarter your potential | | |
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| 14. | The bank officer will
appraise my farm. This means he/she will: a. | sell it to the highest bidder | b. | determine its suitability for development | c. | estimate its fair market value | d. | none of the above | | |
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| 15. | An estimate of costs and
returns associated with a particular enterprise is a/an... a. | bid | c. | scheduled bid | b. | commodity | d. | budget | | | | |
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| 16. | A person goes to the bank to
secure a loan to finance a greenhouse operation. He say's "I don't have the money to start
this by myself, I need more
." a. | commodities | c. | diminishing
returns | b. | capital | d. | variable
costs | | | | |
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| 17. | If a $3,000 micro-computer
system can be depreciated over three years using the straight line method, what is the depreciation
taken for the first year? a. | $3,000 | c. | $4,000 | b. | $1,000 | d. | $2,000 | | | | |
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| 18. | If demand rises and supply
remains constant, price should? a. | fall | b. | remain the same | c. | rise | d. | no determination can be
made | | |
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| 19. | The processes and services
involved in moving a commodity from the producer to the ultimate consumer is
called... a. | production | c. | free market | b. | resource investment | d. | marketing | | | | |
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| 20. | The financial returns after
all costs have been paid is called
. a. | net returns | c. | total returns | b. | gross returns | d. | none of the
above | | | | |
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| 21. | If the price and consumption
of beef goes up then the demand for beef must be
. a. | up | b. | down | c. | the same | d. | no determination can be
made. | | |
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| 22. | From which of the following
can you make the best determination as to the financial status of a person? a. | his total liabilities | c. | his current ratio | b. | his net worth | d. | his debt service
ratio | | | | |
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| 23. | I sold my old worn out
tractor I had used for twenty years for $300.00. This is the
. a. | salvage value | c. | production value | b. | investment credit amount | d. | return to investment value | | | | |
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| 24. | The price of soybeans on the
futures market could not fall from $6.00 to $1.00 during a single trading session because of the
. a. | spot price | c. | price cycle | b. | theoretical capacity | d. | trading limit | | | | |
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| 25. | Which statement is generally
true? a. | The greater the risk the greater the profit
potential. | b. | The greater the risk the greater the loss potential. | c. | Financial risk is the possibility of loss. | d. | all the above. | | |
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| 26. | A price hedge
"protects" the producer against... a. | falling prices | c. | all the above | b. | rising prices | d. | none of the above | | | | |
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| 27. | Which type life insurance
gives maximum protection at the least cost? a. | term | c. | ordinary life | b. | whole life | d. | a comparison cannot be made | | | | |
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| 28. | The most common legal
structure of a farm business is the.. a. | corporation | c. | partnership | b. | sole proprietorship | d. | joint venture | | | | |
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| 29. | Most partnership divisions
and terminations are caused by... a. | disagreement over trivial matters. | c. | low income | b. | lack of written agreement | d. | too large a business | | | | |
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| 30. | In a partnership each
partner can be held responsible... a. | only for one-half the debts | b. | for the total debts | c. | only his/her % share of the debts | d. | only the share of debts he/she personally
authorized | | |
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| 31. | Leverage: a. | is the use of borrowed funds with your own | b. | raises the rate of return if profitable | c. | results in a larger loss if not profitable | d. | all of the above | | |
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| 32. | Ninty-nine percent of
Scott's net worth is in land. What can be said of his situation? a. | he is a walthy man | c. | he does not have good liquidity | b. | most of his assets are very liquid | d. | all the above | | | | |
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| 33. | Which is not a good
reason for good business records? a. | income tax reporting | c. | planning business changes | b. | credit planning | d. | none of the
above | | | | |
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| 34. | A main advantage of product
diversification is... a. | to spread rixk and stablize income | b. | to keep the operation from reaching marginal
return | c. | to keep the operation more liquid | d. | that diversification utilizes economics of
scale | | |
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| 35. | Which of the following is a
type of depreciation/ a. | declining balance | c. | double unitary | b. | straight stick | d. | intermediate | | | | |
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| 36. | The equilibrium price of an
agricultural commodity, at a particular point in time, can be determined by using: a. | the demand schedule | b. | the supply schedule | c. | both the supply curve and the demand curve | d. | both the demand schedule and the demand
curve | | |
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| 37. | Since there is no substitute
for food; as a whole, the demand for agricultural products tends to be: a. | elastic | c. | inelastic | b. | unitary elastic | d. | perfectly
inelastic | | | | |
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| 38. | If the price of an
agricultural commodity is too high, the supply will be greater than the demand resulting
in: a. | surplus | c. | shortage | b. | monopoly | d. | slump | | | | |
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| 39. | The deline in value of an
asset is called... a. | a liability | c. | marginal
return | b. | depreciation | d. | discounted
interest | | | | |
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| 40. | The role of price in a free
market is to serve as a guide: a. | in controlling consumption | b. | in limiting demand | c. | as to how important an item is to the consumers | d. | in deciding what, when and how much to
produce | | |
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| 41. | Which is not a commodity
traded on the futures market? a. | corn | c. | wheat | b. | soybeans | d. | all the above are traded | | | | |
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| 42. | The price received for an
agricultural commodity is determined by which of the following? a. | supply and unit eleasticity | b. | customer desires and preferences | c. | demand and family income | d. | quantity produced and the quantity consumed or
purchased | | |
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| 43. | An amortized loan with level
payments each year has: a. | decreasing annual payments | c. | decreasing interest payments | b. | increasing principle payments | d. | more than one of the above | | | | |
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| 44. | The concept of opportunity
cost,,, a. | says that a resource's opportunity cost
is equal to the return it would have earned in its best alternative use | b. | says opportunitu cost is the same as variable
costs | c. | says opportunity cost is the same as fixed costs | d. | does not include an opportunity cost for
capital | | |
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| 45. | As output is increased,
average fixed cost will: a. | increase | c. | remain
constant | b. | decrease | d. | be equal to marginal
revenue | | | | |
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| 46. | An advantage of the
corporate form of business organization is: a. | easy to organize | c. | limited
liability | b. | no legal requirements | d. | does not pay income taxes | | | | |
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| 47. | A cash flow budget projected
for the next year can provide information on: a. | return to the farm operator's labor and management | b. | projected borrowing requirements and repayment
ability | c. | net worth of the farm business | d. | rate of return on the farm investment | | |
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| 48. | The difference between the
local cash price and the futures price is called the: a. | margin | c. | basis | b. | brokerage fee | d. | hedge | | | | |
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| 49. | A loan to purchase chemicals
for crops is generally called: a. | a mortgage | c. | an operating
loan | b. | an intermediate term
loan | d. | a long term loan | | | | |
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| 50. | Which of the following is
not a depreciable asset for a nurseryman? a. | walk-in cooler | c. | tractor | b. | pots | d. | truck | | | | |
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Use the following information to answer questions 51-53
A sholesale nurseryman shipped 30,000 pots of azaleas F.O.B. to a
retail nursery. The following is in relation to that sale.
Data
Total production cost = $ 1.85 per
pot
Whole sale price =
2.10 per pot
Shipping charges = 18.00 per
thousand
Retailers mark-up = 40% of his total
cost
State sales tax = 3%
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| 51. | What was the total cost to
the retailer of each pot delivered to his nursery? a. | $2.10 | c. | 2.28 | b. | 3.90 | d. | 2.12 | | | | |
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| 52. | What would a pot of these
azaleas cost (including tax) a customer at the retail nursery? a. | $3.29 | b. | 3.1- | c. | 3.20 | d. | 3.03 | e. | 3.06 | | |
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| 53. | What is the wholesaler's
profit on the total shipment? a. | $7,275.00 | b. | 727.50 | c. | 7,500.00 | d. | 750.00 | e. | none of the above | | |
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| 54. | If a recommendation calls
for 150 pounds of actual phosphorus to be applied, how many 50 lb. bags of 5-10-5 should you
purchase?
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| 55. | A customer brings an item to
the check-out marked $18.00 and has a store coupon for a 10% off any purchase. How much should
be charged including 3% sales tax? a. | $16.69 | b. | $16.85 | c. | $18.10 | d. | #15.43 | e. | none of the above | | |
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| 56. | Given the following
information, how much fertilizer should be applied to the soybean crop to maximize
profit?
Soybean price = $4.00
Fertilizer cost = $7/100 lbs.
Fertilizer Lbs/Ac. Yield in Bu Marginal Cost Marginal
Return
300
15
400
20
500
25
600
30
700
33
800
37
900
39
1000
40
1100
41
1200
42
1300
43
1400
44
1500
45
1600
46 a. | 500 lbs per acre | b. | 900 | c. | 1100 | d. | 1400 | e. | 1600 | | |
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Use the following information to answer questions 57-59.
BALANCE SHEET
ANALYSIS
Cash on
hand
$ 2,300
Checking account
balance
3,000
First Mortgage on
farm
100,000
Value of
equipment
20,000
Value of
land
225,000
Value of
livestock
35,000
Loan at
bank
20,000
Second mortgage on
farm
10,000
Value of grain on
hand
20,000
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| 57. | This producer has total
liabilities of? a. | $100,000 | c. | $135,000 | b. | $130,000 | d. | $243,000 | | | | |
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| 58. | This producer has a net
worth of ? a. | 175,300 | c. | 305,300 | b. | 130,000 | d. | 225,000 | | | | |
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| 59. | Most of the producer's
assets are tied up in
? a. | livestock | c. | mortgages | b. | equipment | d. | none of the
above | | | | |
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Partial Budgets
Use the following information to answer
questions 60-65.
Nancy is considering a change in he pick-your-own strawberry
operation. She currently has 10 acres in production. Customers can pick their
strawberries for 50 cents a pound. When the customers pick the berries her saleable production
is 2000 pounds per acre. If she hires them picked she can get 2300 pounds per acer because of
the extra care and systematic work her pickers will provide.
Data: Price per lb. to pick-your-own customers = 50
cents
Cost to have the berries picked by her labor = 15 cents per
lb.
Price per lb. Nancy will receive for Berries delivered = 75
cents
Delivery costs = 5 cents per lb.
Pick-your-own advertising = $300.00
Marketing of berries to be delivered = $400.00
Containers and miscellaneous equipment for pick-your-own = $700
Containers and miscellaneous equip. for delivered berries = $750
Cost
of producing one acre of berries to the pick stage = $475
Work Area:
Additional Costs =
Additional Returns =
Reduced Returns
=
Reduced Costs =
A. Total annual additional B.
Total annual additional
Costs & reduced
returns =$
returns and reduced costs =
$
Net change in income (A&B) =
$
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| 60. | What would be the net change
in income for Nancy's 10 acres of strawberries? a. | -$5,700 | b. | $2,500 | c. | $5,700 | d. | -$2,500 | e. | None of the above. | | |
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| 61. | What would be Nancy's total
cost per pound of berries delivered to market according to the proposed change? a. | 45.7 cents | c. | .50 cents | b. | 20.65 cents | d. | 38.87 cents | | | | |
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| 62. | What will be Nancy's gross
returns with the change proposed? a. | $1725 | b. | $17250 | c. | $11500 | d. | $13456 | e. | none of the above | | |
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| 63. | What will be Nancy's net
return with the proposed change? a. | $11500 | b. | $17250 | c. | $14357 | d. | $2500 | e. | $6750 | | |
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| 64. | What wold be Nancy's net
return under the pick-your-own system? a. | $4250 | b. | $5750 | c. | $10000 | d. | $17250 | e. | none of the above | | |
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| 65. | How much would net returns
be increased if Nancy got 76 cents per pound instead of 75 for the delivered
berries? a. | $2300 | b. | $230 | c. | $144.50 | d. | $1445 | e. | none of the above | | |
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Use the following information to answer questions 66-68
Cash flow for John's swine farm
John
plans to reinvest any profit from the operation.
Cash Inflow Jan-March
April-June July-Sept. Oct.-Dec.
Hogs
Sold
0
$40,000
0 $40,000
Cash Outflow
Feeder pigs
$13320
0
$13320 0
Feed
20000
0
20000 0
Fixed
Costs
300
300
300 300
Totals
Cash surplus
6080
or deficit
Operating loan
33620 0
Balance
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| 66. | How much will John have to
borrow July-September? a. | $3360 | b. | $28200 | c. | 6080 | d. | 27540 | e. | none of the above | | |
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| 67. | What should be the cash
status at the end of the year? a. | -6080 | d. | +80000 | b. | -12160 | e. | none of the above | c. | +6080 | | | | |
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| 68. | If John marketed 200,000
pounds of pork during the year, how much did he receive per pound for his hogs? a. | 20 cents | b. | 35 cents | c. | I | d. | 25 cents | e. | not enough information is given to make a
determination. | | |
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Curtis has several options for the purchase and financing of a computer. He can
pay cash or finance the computer and put his cash in savings drawing 7% interest. He also has
choice of two companies.
Company A
Price = 2000
Discount for cash = 10%
Finance charge for 1 year =
$300
Company B
Price
= $2000
No cash discount
Finance charge for 1 year =
$280
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| 69. | What rate of interest is company B charging if all the $280 is due to
interest? a. | 7% | b. | 10% | c. | 14% | d. | 12% | e. | none of the
above | | |
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| 70. | How much interest would Jimmy earn if he put his $20000 in the bank for one
year? a. | $70 | b. | $60 | c. | $100 | d. | $140 | e. | none of the
above | | |
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| 71. | What should Jimmy do? a. | Pay cash to company
A | b. | Pay
cash to company B | c. | Purchase and finance with company
B | d. | Purchase and finance with company A | | |
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| 72. | Suppose your company charges $10 per man-hour to install farm fencing. How much
would you charge if your crew of 3 persons worked 4 eight hour days on a certain
job? a. | $300 | b. | $90 | c. | $120 | d. | $960 | e. | none of the
above | | |
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| 73. | Amy borrowed $3000 and will repay the debt with 24 monthly payments of $135.00
each. How many dollars in interest will she pay? a. | $240 | b. | 325 | c. | 768 | d. | 1245 | e. | 545 | | |
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| 74. | Which
statement below is correct based on Amy's amortized mortgage as described in #73? a. | Amy paid the
greatest amount on the principal the first year | d. | The principal and interest paid were the same each
month | b. | Amy paid the greatest amount of interest the first
year | e. | All the above is
true | c. | The total
interest paid the first year was the same as the second year | | | | |
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| 75. | Data
for problem 75:
Dennis has determined from his records that he can
sell fern basketsa at the following quantities and prices.
Size
Price
Quantity that will sell
Production
6
inch
$3
1000
$2.68
8
inch
$4
1300
$3.00
10
inch
$5
1350
$4.58
12
inch
$8
750
$5.58
If Dennis can grow only one size basket which size
should he produce to maximize his profit? a. | 6 | d. | 12 | b. | 8 | e. | A determination cannot be made from this
data | c. | 10 | | | | |
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