Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question.
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| 1. | Hedgers and speculators in the futures market are different in
that... a. | speculators
always want the price to decrease. | b. | hedgers are more at risk. | c. | speculators do
not produce a product to sell. | d. | all the above. | | |
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| 2. | Speculators in the futures market... a. | cause confusion
in the market. | b. | accept the price risk the hedgers are seeking to
avoid. | c. | make a profit if prices increase. | d. | should not be
allowed. | | |
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| 3. | All
of the following are said to be inelastic with regard to demand except... a. | pork. | c. | gasoline. | b. | salt. | d. | sugar. | | | | |
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| 4. | The
total quantity of goods and services produced is called... a. | supply. | c. | produce. | b. | demand. | d. | none of the above. | | | | |
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| 5. | A
plan that projects expected returns and costs is called a... a. | supply and
demand curve. | c. | consumption
plan. | b. | budget. | d. | hedge. | | | | |
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| 6. | A
producer most often uses a cash flow statement to... a. | estimate the
amount of credit needed and when it will be needed. | b. | determine
equipment needs. | c. | estimate potential cash overflow. | d. | estimate when
debt payments will come due | | |
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| 7. | If
the government allowed no immigration to this country and controlled illegal
immigration, the effect on agriculture would probably be... a. | a shortage of
agricultural labor. | b. | an increase in the hourly wage for agricultural
workers. | c. | an increase in the total cost of
labor. | d. | all the above. | | |
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| 8. | Which
is an advantage of leasing land over land ownership? a. | more capital is
available for other uses. | b. | the risk of decreasing land prices is
avoided. | c. | farm size can be varied easily. | d. | all the
above | | |
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| 9. | Suppose that the government passed a law setting the maximum interest rate that
could be charged to agricultural producers by commercial banks at 5%. A likely
result would be that... a. | banks would begin requiring better record keeping by
producers. | b. | farmers would borrow more money from
banks. | c. | commercial banks would not | d. | there would be
little effect | | |
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| 10. | If
beef cattle producers are making an unusually high profit, then one might assume... a. | other producers
will enter the beef cattle business. | b. | the supply of beef will increase. | c. | A and
B. | d. | none of the
above. | | |
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| 11. | 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? a. | $20,000 | c. | $12,000 | b. | $16,000 | d. | $22,000 | | | | |
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| 12. | Returns to unpaid operator and family labor, equity capital, and
management is: a. | net worth. | c. | net farm income. | b. | owner's
equity. | d. | capital
gains. | | | | |
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| 13. | Which
of the following is NOT a variable cost? a. | livestock feed | c. | fuel | b. | depreciation | d. | seed | | | | |
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| 14. | A
business that is owned and controlled by one person is a: a. | corporation. | c. | sole
proprietorship. | b. | limited corporation. | d. | partnership. | | | | |
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| 15. | The
ability of a business to pay off liabilities without disrupting business is termed: a. | solidity. | c. | feasibility. | b. | liquidity. | d. | elasticity | | | | |
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| 16. | An
agreement to buy and receive or to sell and deliver a commodity at an
upcoming date
with certain specified characteristics is a: a. | hedge. | c. | futures contract. | b. | option. | d. | put. | | | | |
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| 17. | If
demand for a product goes down and all other factors remain the same, then the
price of that product will probably: a. | decrease. | c. | remain the
same. | b. | increase. | d. | can't tell from the information given | | | | |
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| 18. | If
the price of a product increases and the demand does not change, the demand
for the product is said to be: a. | inelastic. | c. | unitarily elastic. | b. | elastic. | d. | solely
elastic. | | | | |
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| 19. | 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: a. | income statement. | c. | partial budget. | b. | cash flow
statement. | d. | balance
sheet. | | | | |
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| 20. | An
advantage of a farm corporation is that: a. | it is less complicated and easy to
organize. | b. | it limits liability of the owners. | c. | corporations
cannot be sued. | d. | it is easier for corporations to get
credit. | | |
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| 21. | Which
is not true about the value of money? a. | The value of money changes. | b. | Inflation
cheapens money. | c. | Deflation increases the value of
money. | d. | One dollar received today is worth less than a dollar received
next year | | |
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| 22. | 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. a. | trigonometry | c. | compounding | b. | geometry | d. | discounting | | | | |
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| 23. | Which
of the following should not be depreciated? a. | trucks | c. | buildings | b. | land | d. | tractors | | | | |
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| 24. | 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? a. | accrual method | c. | shoe box method | b. | cash
method | d. | judged on this
factor alone, all are equal | | | | |
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| 25. | 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... a. | producer. | c. | speculator. | b. | liquidator. | d. | hedger. | | | | |
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| 26. | If
all other factors remain the same and the supply of a product goes up, then the
price of that product will probably... a. | fall. | c. | remain the
same. | b. | rise. | d. | go up, then back down dramatically. | | | | |
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| 27. | If a
tractor purchased in 1987 for $12,000 is valued at $14,000 today, then it has... a. | appreciated. | c. | decreased in
value. | b. | depreciated. | d. | hedged. | | | | |
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| 28. | A
pork producer who does not produce this year will lose some money including
_____. a. | medicine | c. | feed | b. | depreciation | d. | sales commissions | | | | |
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| 29. | Which
items are least readily converted into cash without loss? a. | current
assets | c. | crops held for
sale | b. | intermediate or
working assets | d. | fixed or long
term assets | | | | |
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| 30. | A
document that shows the exact size, location, ownership, and method of
ownership of
property is a... a. | contract. | c. | rite of habeas
corpus. | b. | deed. | d. | budget. | | | | |
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| 31. | 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. | | | | |
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| 32. | 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. | | |
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| 33. | 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. | | | | |
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| 34. | 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. | | | | |
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| 35. | ____________ is a type of accounting system. a. | Financial | c. | Cash
method | b. | Single-entry | d. | Physical | | | | |
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| 36. | 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 | | | | |
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| 37. | What
is the single best record keeping system for everyone? a. | Complete farm
business analysis | b. | Cash method | c. | Accrual
method | d. | There is no single best record keeping system for
everyone | | |
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| 38. | 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. | | | | |
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| 39. | 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 | | | | |
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| 40. | _____________ 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 | d. | Cash expenditures | | | | |
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| 41. | 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 | | | | |
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| 42. | 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. | | | | |
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| 43. | 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 1 st driver who ran into the
fence | d. | No one is at
fault | | | | |
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| 44. | 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. | | |
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| 45. | 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. | | |
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| 46. | 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. | | |
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| 47. | 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 | | | | |
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| 48. | 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. | | | | |
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| 49. | 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 | | | | |
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| 50. | Which
of the following Net Capital Ratios would indicate the best financial
position?
(Total Assets/Total Liabilities)
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Use
the following information to answer questions 51-58.
Mr. Cash 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
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| 51. | What
is the total value of the current assets? a. | $29,300 | c. | $30,300 | b. | $26,300 | d. | $25,400 | | | | |
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| 52. | What
is the total value of the fixed assets for Mr. Cash's operation? a. | $27,000 | c. | $29,300 | b. | $57,000 | d. | $106,000 | | | | |
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| 53. | Mr.
Cash's total assets amount to: a. | $106,000 | c. | $133,000 | b. | $162,300 | d. | $75,000 | | | | |
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| 54. | What
is the total value of the intermediate assets? a. | $105,000 | c. | $133,000 | b. | $162,300 | d. | $79,000 | | | | |
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| 55. | What
is the total of Mr. Cash's liabilities? a. | $88,000 | c. | $8O,OOO | b. | $59,000 | d. | $94,000 | | | | |
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| 56. | Mr.
Cash's business is: a. | current. | c. | insolvent. | b. | intermediate. | d. | solvent. | | | | |
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| 57. | What
is Mr. Cash's net worth? a. | -$67,400 | c. | $12,000 | b. | -$67,700 | d. | $68,300 | | | | |
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| 58. | What
is Mr. Cash's debt-equity ratio?
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Income Statement Analysis. Use the following information from a forestry
consulting
business to answer questions 59 - 62.
Income from timber sales
$34,000
Income from timber cruises
9,500
Income from land
management 28,900
Building rent
6,800
Equipment rent
1,100
Increase in
inventory of supplies
7,000
Hired labor expense
32,000
Cash operating
expenses
900
Machinery depreciation
900
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| 59. | What
is the gross cash income for this business? a. | $51,459 | c. | $72,400 | b. | $31,600 | d. | $40,800 | | | | |
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| 60. | What
is the net cash income for this business? a. | $72,400 | c. | $40,800 | b. | $31,600 | d. | $37,700 | | | | |
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| 61. | What
is the net income for this business? a. | $37,700 | c. | $39,500 | b. | $31,600 | d. | $23,700 | | | | |
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| 62. | If
the owner worked in this business for 45 hours per week for 50 weeks, what is
the return per hour for his work? a. | $13.32 | c. | $19.11 | b. | $16.76 | d. | $13.45 | | | | |
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Use
the following information to answer Questions 63 - 65. Wheat sells for S400
per bushel and nitrogen fertilizer sells for S.40 per pound.
~. _ .
Total
pounds
of fertilizer
per acre |
Total
wheat
yield per acre |
Additional
pounds of
fertilizer
applied |
Additional
bushels
wheat
per
acre |
Cost of
added
fertilizer |
Return from
additional
yield |
0 |
18 |
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|
10 |
22 |
10 |
4 |
4 |
16 |
20 |
26 |
10 |
4 |
4 |
16 |
30 |
28 |
10 |
2 |
4 |
8 |
40 |
30 |
10 |
2 |
4 |
8 |
50 |
31 |
10 |
1 |
4 |
4 |
60 |
32 |
10 |
1 |
4 |
4 |
70 |
33 |
10 |
1 |
4 |
4 |
80 |
33 |
10 |
0 |
4 |
0 |
90 |
33 |
10 |
0 |
4 |
0 | | | | | | |
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| 63. | How
much fertilizer should be applied to maximize profit? a. | 40
pounds | c. | 80
pounds | b. | 60 pounds | d. | 90 pounds | | | | |
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| 64. | What
is the additional net profit from fertilizing with 30 pounds of nitrogen rather than using no
fertilizer at all?
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| 65. | The
economic principle demonstrated here is the: a. | principle of elasticity. | b. | principle of
investment. | c. | principle of cash flow | d. | none of
these | | |
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Problems 66 - 67. Help Harvey decide how he should market his hogs,
given the
following information.
-
he has 200 hogs weighing 240 pounds each
- he can get:
47 cents per pound at the local market in Macon
49 cents per pound at Thomasville
48 cents per pound at Cordele
50 cents per
pound at Baxley
- it will cost him:
$100 to deliver them to Macon
$200 to deliver
them to Thomasville
$550 to deliver
them to Baxley
$150 to deliver
them to Cordele
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| 66. | Harvey should sell his hogs at: a. | Macon | c. | Baxley | b. | Thomasville | d. | Cordele | | | | |
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| 67. | Suppose his break-even price is 44 cents per pound. What will his profit be if his
selling price is 52 cents per pound? a. | $1696 | c. | $2329 | b. | $1786 | d. | $3840 | | | | |
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Balance Sheet Analysis. Problems 68 - 71.
Use the
following information to answer questions 68 - 71.
Cash and checking account balance $
13,500
Mortgage on land
220,000
Value of machinery
50,000
Value of land
250,000
Value of feeder
livestock 20,000
Loan at bank
(due in 90 days) 90,000
Loan on machinery
20,000
Value of grain in storage
15,000
Interest due and payable
3,000
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| 68. | This
producer has assets with a total value of ___________. a. | $88,500
| b. | $103,500 | c. | $203,500 | d. | $348,500 | | |
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| 69. | This
producer has a net worth of ___________. a. | $102,500 | c. | $118,500 | b. | $1
5,500 | d. | $235,500 | | | | |
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| 70. | What
is the producer's equity ratio? (Also known as Debt-to-Net Worth) (Total
Liabilities divided by Net worth)
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| 71. | .
Which of the following statements is true of this producer's situation ? a. | This producer
owes more than his equity in the farm. | b. | A lender will probably not lend money to this
producer. | c. | This producer's debt equity ratio is unsafe for the producer
and the lender. | d. | All of the above statements are true. | | |
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Mr.
Whitehead is doing an end-of-the-year analysis on his cotton mop. Answer
questions 72-75 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 Ibs.)
Fertilizer cost
= $52,875
Insecticide and Herbicide cost = $84,545
Labor cost=
$32,695
Equipment cost= $128,935
Other variable
cost = $87,540
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| 72. | What
was his total yield per acre? a. | 1.25 bales | c. | 1.98 bales | b. | 2
bales | d. | 1.79
bales | | | | |
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| 73. | What
is his gross income from his cotton crop? a. | $1445.04 | c. | $288,805 | b. | $235,930 | d. | $722,520 | | | | |
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| 74. | What
is his net profit from the harvest of his cotton crop? a. | $288,805 | c. | $235,930
| b. | $722,520 | d. | $268,625 | | | | |
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| 75. | What
is the break-even price per pound for his cotton crop?
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