Farm Business Management 1996 -- Georgia Agriculture Education Curriculum

Name:

Multiple Choice

Identify the letter of the choice that best completes the statement or answers the question.

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

a.	records.	c.	marketing.
b.	cash-flow analysis.	d.	budget analysis.

A cash-flow projection is defined as:

a.	a written physical and financial plan that is used to compare alternative courses of action for the business.
b.	the statistical calculation of the probabilities of success.
c.	an estimate of monthly cash inflows and outflows over a period of time.
d.	none of the above.

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

a.	Law of Supply.	c.	Law of Elasticity.
b.	Law of Demand.	d.	Law of Price.

Examples of records for an income tax return are:

a.	hired help.	c.	depreciations schedule.
b.	farm income and expenses.	d.	all of the above.

is a type of accounting system.

a.	Financial	c.	Cash method
b.	Single-entry	d.	Physical

The amount of products that are produced depend on:

a.	new technology.	c.	expected increase in their selling price.
b.	weather.	d.	all of the above.

What is the single best record keeping system for everyone?

a.	Complete farm business analysis B . Cash method
b.	W
c.	Accrual method
d.	There is no single best record keeping system for everyone

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

a.	liabilities.	c.	accounts receivable.
b.	capital assets.	d.	accounts payable.

Which one of the following is not an example of market cost?

a.	feed	c.	fertilizer
b.	livestock purchased for resale	d.	raised breeding livestock

10.

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

a.	Current values	c.	Cash receipts
b.	Book values

11.

Which one of the following is an example of farm income?

a.	Interest received from savings accounts.
b.	Income from rental houses.
c.	Payment received for doing machine work for someone else.
d.	Depletion income from mineral lease bonuses.

12.

Of the following, which one is NOT an example of business expenses?

a.	insurance	c.	conservation and land clearing
b.	utilities	d.	items purchased for resale

13.

The price of corn was high this year. What factor probably caused the price to be higher than normal?

a.	There was a surplus of corn.	c.	There was a shortage of corn.
b.	Supply was greater than demand.	d.	Too many people planted corn.

14.

Which one of the following is NOT a fixed cost?

a.	fertilizer	c.	taxes
b.	breeding stock	d.	insurance

15.

In the 1996 Farm Bill the Government set the price of peanuts at a minimum of $610 a ton. This price setting can best be termed as a:

a.	price ceiling.	c.	price floor.
b.	price cap.	d.	price elasticity.

16.

Goals are important in farm management because:

a.	they aren't really all that important.
b.	they give direction in decision making.
c.	make it easier to acquire a loan at the bank.
d.	both b and c.

17.

is used to record income and expenses that cannot be attributed directly to an enterprise at the time incurred.

a.	Major enterprise	c.	Overhead enterprise
b.	Minor enterprise	d.	None of the above

18.

Supplemental records supply additional information which helps provide a more complete record system. Supplemental records provide:

a.	a record of yields, production, and physical performance.
b.	a record of materials and resources used.
c.	a record of production practices and weather conditions.
d.	all of the above

19.

Net worth equals:

a.	Liabilities - Assets	c.	Assets - Liabilities
b.	Gross receipts - Total expenses	d.	Assets + Liabilities

20.

Assets are items that have a market value. They are separated into three categories which are , ,and .

a.	Current, Intermediate, and Long-term	c.	Fixed, Single, and Double
b.	Current, Single, and Double	d.	Intermediate, Single, and Double

21.

The ability to pay debts as they come due is called:

a.	equity.	c.	liquidity.
b.	solvency.	d.	ratio.

22.

Net Cash Income equals:

a.	Gross Receipts - Total Expenses	c.	Gross Receipts + Total Expenses
b.	Total Expenses - Gross Receipts	d.	Total Expense / Gross Receipts

23.

Out of the following, which one usually has a low capital turnover ratio and low profitability?

a.	Cash grain operation	c.	Beef cow-calf operations
b.	Dairy operation	d.	Both A & B

24.

A poultry producer is producing 100,000 broilers a year, but after determining he was in stage I of production he decided he needed to . This would allow him to maximize his profit.

a.	decrease his flock to a number less than 100,000.
b.	increase his flock to a number greater than 100,000.
c.	he is maximizing his profits with a flock of 100,000.
d.	not enough information to determine where he should produce.

25.

You have been showing hogs for several years. An example of a variable cost in your established show hog project is :

a.	hog paneling.	c.	feed.
b.	a water trough.	d.	a show whip.

26.

In a production function, levels of production are divided into:

a.	four quadrants called stage I, II, III, and IV.
b.	three stages called I, II, and III.
c.	two stages called I and II.
d.	four stages called A, B, C, and D

27.

Ray owns a greenhouse in North Georgia. Two hundred yards away from Ray's

greenhouse is a chicken house owned and operated by Marc. On a cold stormy night, part of the roof of the chicken house blew off into the side of the greenhouse and broke a good portion of the glass. This damage allowed the cold temperature to kill all of the Easter Lilies Ray was growing for the Easter holiday. In this case is Marc responsible for the anything?

a.	No, Marc is not responsible for the weather.
b.	No, Ray's greenhouse was to close to the chicken house by OSHA regulations, therefore he is not responsible for any damage.
c.	Yes, Marc is responsible for the repair to the greenhouse, but is not responsible for the replacement of the Easter Lilies.
d.	Yes, Marc is responsible for both the repairs and the Easter Lilies.

28.

Which is NOT true for the legal liabilities of a trespasser?

a.	You are not responsible for personal injuries.
b.	You may shoot an unthreatening trespasser in order to get him off your land.
c.	You do not have to post signs that forewarn of danger on your land.
d.	You do not need to make the land safe for a trespasser.

29.

A(n) is a marketplace where there are many businesses producing the same product. A single buyer or seller can=t influence the price structure. No producer is so large as to control or perceptively affect market supply or demand.

a.	monopoly	c.	oligopoly
b.	monopolistic competition	d.	perfect competition

30.

Liquidity is best defined as:

a.	the ability to meet cash obligations as they come due.
b.	total assets minus total liabilities.
c.	the rate of capital turn-over.
d.	having no long-term debt.

31.

Of the following which is not an example of a tangible function?

a.	Transporting and distributing	c.	Buying and selling
b.	Financing	d.	Processing, grading, and packing

32.

By using distant banks buyers have the use of your money interest free while checks are in transit. What is this called?

a.	Forward contract	c.	Expressed contract
b.	Float	d.	Inferred contract

33.

A cash lease is good for livestock grazing because it is simple, and reduces the chance of controversy. Frank uses a cash lease when he leases grazing land. He and the landowner set a fixed price per acre when they make their deal. This is the most common type of cash lease. The landlord may prefer the cash lease because:

a.	it gives the landlord less control of the land.
b.	it generally provides lower income.
c.	there is fixed rent.
d.	they retain an active interest in management.

34.

In the marketplace, prices depend on:

a.	the situation at a given location.
b.	a given time for a given quality.
c.	a specified form of a particular commodity.
d.	all of the above

35.

Which one is NOT an advantage of farm corporations?

a.	Separation of ownership and management
b.	Economic reasons
c.	Ease of continuing in business
d.	Unlimited liability

36.

Gail and her fellow producers often base their price expectations on past price levels. If prices are higher in one year, then they probably will increase production the next. Then the supply will increase and prices will fall. If there is an increase in demand the prices will:

a.	stay the same
b.	decrease
c.	increase
d.	this cannot be determined based on the data given

37.

The formula for measuring price elasticity is:

a.	Percentage change in price/ Percentage change in quantity
b.	Percentage change in quantity/ Percentage change in price
c.	Price - Quantity
d.	Price + Quantity

38.

A contains the financial history of your business transaction for a given time period.

a.	Cash flow summary	c.	Cash flow plan
b.	Cash flow projection	d.	Cash method

39.

There are several ways of transferring legal ownership of property from one person to another. The most common are:

a.	wills	c.	gifts
b.	contracts	d.	all of the above

40.

A riparian is someone who:

a.	owns over 1,000 acres of land.	c.	owns land bordering a stream.
b.	owns cattle, hogs, and chickens.	d.	owns land bordering mountains.

41.

Dane has a herd of Angus cows. One rainy night a driver runs into the fence and then drives away leaving the fence broken. One of the Angus cows wanders out on the road. Another car driven by Christy hits the cow. The cow dies and Christy=s car is damaged. Who is responsible?

a.	Dane	c.	Christy
b.	The 1st driver who ran into the fence	d.	No ones at fault

42.

Most states have laws that govern boundary fences. In some states the fencing regulations are left largely to local government. Although, laws vary and are subject to change, which one usually prevails?

a.	There are certain stipulations made for materials used on inside fences.
b.	If people build a fence between their property then the state pays for it.
c.	No state laws require landowners to enclose their land with a fence tight enough and strong enough to turn livestock.
d.	There are state laws that require landowners to enclose their land with a fence tight enough and strong enough to turn livestock.

43.

Dana's cow gets out and is found by Chris. Chris has several options, which one is NOT true?

a.	The stray cow becomes the property of Chris after 24 hours.
b.	Chris can confine and care for the cow but he must make a reasonable attempt to locate the owner of the stray.
c.	Chris is entitled to make reasonable use of the stray cows.
d.	When Dana comes for her cow, she must pay Chris for feed, housing, care and other costs.

44.

Cooperatives are best characterized by the fact that:

a.	they operate on a profit basis.
b.	membership in a cooperative is not voluntary.
c.	each member has some voice in the cooperative business affair.
d.	members do not do business with the cooperative directly.

45.

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

a.	Breach of contract	c.	Inferred contract
b.	Forward contract	d.	None of the above

46.

When demand and supply are equal, price is said to be at:

a.	an all time high.	c.	equilibrium.
b.	an all time low.	d.	elasticity.

47.

A person appointed in a will or by the court system to carry out requests and dispose of all property in accordance with the deceased is a:

a.	Guardian	c.	Executor
b.	Estate holder	d.	Donor

48.

is the buying and selling of commodity futures to protect a grower or producer from extreme price fluctuations in the marketplace at the time the product is sold.

a.	Internal Rate of Return	c.	Market
b.	Investment Tax Credit	d.	Hedging

49.

A farmer or rancher has certain duties toward people that are on their land. The people that are on the farmers or rancher's land can be divided into three groups. Which one of the following is not one of the three groups?

a.	Trespassers	c.	Licensees
b.	Neighbors	d.	Invitees

50.

An independent contractor is a person or organization performing a job without control from the employer. The employer only determines the results. You, as an employer, have no control over the method used to do the job. Which of the following would be an independent contractor?

a.	A custom harvester	c.	A well driller
b.	A crop duster	d.	All of the above

Use the following information to answer questions 51-63.

Mr. Ellington is examining the financial performance of his diversified livestock operation. He has assembled the following data:

Checking account balance $10,800

Savings account balance $15,500

Supplies on hand $ 1,000

Feed on hand $ 3,000

Breeding herd $75,000

Equipment $30,000

Land and buildings $27,000

Machinery loan $20,000

Feedlot equipment loan $15,000

Feed bill $ 4,000

Interest on land and equipment payments $20,000

Mortgage on farm $35,000

51.

What is the total value of the current assets?

a.	$29,300	c.	$30,300
b.	$26,300	d.	$25,400

52.

What is the total value of the fixed assets for Mr. Ellington=s operation?

a.	$27,000	c.	$29,300
b.	$57,000	d.	$106,000

53.

Mr. Ellington's total assets amount to:

a.	$106,000	c.	$133,000
b.	$162,300	d.	$75,000

54.

What is the total value of the intermediate assets?

a.	$105,000	c.	$133,000
b.	$162,300	d.	$79,000

55.

What is the total of Mr. Ellington's liabilities?

a.	$88,000	c.	$80,000
b.	$59,000	d.	$94,000

56.

Mr. Ellington's business is:

a.	current.	c.	insolvent.
b.	intermediate.	d.	solvent.

57.

What is Mr. Ellington's net worth?

a.	-$67,400	c.	$12,000
b.	-$67,700	d.	$68,300

58.

What is Mr. Ellington's debt-equity ratio?

a.	1.37	c.	2.14
b.	1.7	d.	1.2

59.

Farmer McIntosh wants to increase the size of his Idaho potato farm. He decides that the only way to do this is borrow $120,000 from The First State Bank of Boise at a simple interest rate. Currently the interest rate is 9% and is expected to increase 1% next year. Therefore he is trying to see how much money he would save in interest if he were to borrow now as opposed to waiting a year. He intends to borrow the money for ten years. How much would he save by borrowing now rather than waiting a full year.

a.	$21,000	c.	$12,000
b.	$2,100	d.	$1,200

60.

Jason just bought a new tractor for $65,000. He decides that he will use the tractor for ten years at which time he will sell it at a salvage value of $20,000. What will be the rate of depreciation using the straight-line method?

a.	$5,000/year	c.	$2,000/year
b.	$6,500/year	d.	$4,500/year

61.

Your catfish operation is valued at $120,000. You have a debt of $70,000 for the initial setup and owe an additional $10,000 for fish, feed, and equipment. Your ratio of assets to liabilities is....

a.	3 : 2	c.	2 : 2
b.	3 : 1	d.	2 : 1

62.

When Fred sold his crossbred show steer he received $1,075. He figured his total expenses to be $925. The percentage net return realized was_____.

a.	14%	c.	05%
b.	26%	d.	16%

63.

Laura needs term insurance for the next 5 years until she is vested in her retirement plan. Term insurance coverage of $300,000 will cost her $9 per month for 3 years from Company A. Company B offers her $300,000 coverage for 3 years for $3000 paid at the beginning of coverage and no other changes, plus, at the end of 5 years her $3000 would be returned. The local banks are currently paying 12% on 5 year certificates of $500 or more compounded yearly. Laura=s best alternative is to:

a.	purchase from Company A
b.	purchase from Company B
c.	purchase one half from each Company.
d.	the costs are so close she should choose on Company reputation
e.	put her money in the bank at 12% and insure herself

Income Statement Analysis. Use the following information on a greenhouse operation to answer questions 64-67.

Income from bedding plant sales..............49,000

Income from potted plant sales.................28,000

Income from poinsettias............................15,000

Building rent. ..............................................6,500

Equipment rent ........................................... 950

Increase in inventory supplies ....................8,000

Hired labor expense ..................................35,000

Cash operating expenses ................................850

Machinery depreciation .................................850

64.

What is the net cash income for this business?

a.	48,500	c.	52,200
b.	55,850	d.	60,850

65.

What is the net income for this business?

a.	47,850	c.	52,200
b.	55,850	d.	60,850

66.

What is the gross cash income for this business?

a.	100,000	c.	88,000
b.	92,000	d.	72,500

67.

If the owner worked in this business for 35 hours per week for 75 weeks, what is the return per hour for his work?

a.	5.00	c.	21.28
b.	10.32	d.	18.23

Marvin is doing an end-of-the-year analysis on his cotton crop. Answer questions 68-72 based on his cotton crop data.

900 acres were planted

600 acres were leased at $120 per acre

Interest on mortgage payment on 300 acres =$28,000

price per pound = $ .81

Total yield = 1,784 bales (one bale equals 500 lbs.)

Fertilizer cost = $52,875

Insecticide and Herbicide cost = $84,545

Labor cost= $32,695

Equipment cost= $128,935

Other variable cost = $87,540

68.

What was Marvin's total yield per acre?

a.	1.25 bales	c.	1.98 bales
b.	2 bales	d.	1.79 bales

69.

What was the total expenses for this crop?

a.	$402,045	c.	$433,715
b.	$486,590	d.	$453,895

70.

What is his gross income from his cotton crop?

a.	$1445.04	c.	$288,805
b.	$235,930	d.	$722,520

71.

What is his net profit from the harvest of his cotton crop?

a.	$288,805	c.	$235,930
b.	$722,520	d.	$268,625

72.

What is the break-even price per pound for his cotton crop.

a.	$ .55	c.	$ .32
b.	$ .67	d.	$ .47

The following information is to be used for questions 73-75:

A farmer wishes to fertilize his corn with 200 pounds of nitrogen per acre. He can choose between the following three types of fertilizer at the prices shown.

Choice #1 - 20-0-0 at $110.00 per ton (2,000 lbs.)

Choice #2 - 45-0-0 at $200.00 per ton

Choice #3 - 82-0-0 at $325.00 per ton

73.

If the farmer selects the 45-0-0, what will be the cost per pound of actual nitrogen applied?

a.	$0.22	c.	4.45
b.	4.50	d.	0.30

74.

Which fertilizer should be selected as the cheapest source of nitrogen?

a.	#1	c.	#3
b.	#2	d.	#1 and #2 equal

75.

Using your choice #3, how many pounds of fertilizer material must be applied per acre in order to apply exactly 200 pounds of actual nitrogen?

a.	400	c.	200
b.	445	d.	245