2014 STATE FFA FARM BUSINESS MANAGEMENT TEST
PART 2
Financial Statements
(FINPACK Balance Sheets found in the resource information)
Please use the Market Value when making the calculations for the
Zimmerman Farm. Also round the number to the nearest hundredth.
1/1/2012
1/1/2013
1/1/2014
Current Ratio
1.32
1.92
1.17
Ownership Equity
0.69
0.72
0.72
Leverage Ratio
0.46
0.46
0.39
Current Debt Ratio
0.52
0.56
0.86
Debt to Asset Ratio
0.31
0.28
0.29
Balance Sheets and Income Statement
1.
The change in Net Worth from 1/1/2013 to 1/1/2014 was:
a.
b.
c.
d.
2.
The current ratio is trending?
a.
b.
c.
3.
$1,106
$371,958
$370,852
$25,822
Stronger
Steady
Weaker
On which date
strongest?
was
the
Zimmerman’s
a. 1/1/2012
b. 1/1/2013
c. 1/1/2014
1
current
ratio
the
4.
What is the Zimmerman Farm’s Operating Profit Margin ratio
for 2013 based on the Farm Income Statement from page 1 of
the resource packet, assuming they purchased no feeder
livestock or feed?
a.
b.
c.
d.
5.
The Zimmerman’s 1/1/2014 total working capital
percentage of their 2013 total farm expenses:
a.
b.
c.
d.
6.
what
8.0
8.6
9.0
9.6
42
47
52
57
On the 1/1/2014 Balance Sheet, how much of the Zimmerman’s
net worth is gained from the difference between market and
cost values?
a.
b.
c.
d.
8.
is
Using the 1/1/2014 Balance Sheet, calculate the percentage
of total assets that are classified as Intermediate Assets
(use market value)?
a.
b.
c.
d.
7.
0.25
0.28
0.15
0.18
$
$
$
$
630,449
61,701
44,120
586,329
On the income statement on page 1 of the resource packet,
what are some possible causes for the large negative
inventory change?
a.
b.
c.
d.
Poor Yields
Poor Prices
Decrease in Prepaid Expenses
All of the Above
2
9.
The ratios from 1/1/2012 to 1/1/2014 indicate what possible
scenarios:
a.
b.
c.
d.
10.
What would be the main cause of the decrease in working
capital for the Zimmerman’s from 1/1/2013 to 1/1/2014?
a.
b.
c.
d.
11.
Higher grain prices
Lower inventory values
Lower long term debt
Lower current debt
How much did their total working capital decrease between
1/1/2013 and 1/1/2014?
a.
b.
c.
d.
12.
The Zimmerman’s are increasing current debt load
The Zimmerman’s are decreasing overall debt load
both a and b
none of the above
$264,080
$33,323
$230,847
$41,858
What steps could the Zimmerman’s take to increase their
working capital by 1/1/2015?
a.
b.
c.
d.
Bid with no limits at the next local land auction
Borrow more operating money
Pay for a new tractor with cash
None of the above
3
Projected Budget
Aaron Zimmerman has decided on the following crop and livestock
program. Due to the Agricultural Act of 2014, no program
payments will be issued until following the 2014 crop season.
Use the Average Farm from Region 3 to determine cost.
CROP
Barley Owned
Barley Rented
Corn Owned
Corn Rented
Soybeans Owned
Soybeans Rented
Hay, Mixed Alfalfa/Grass Owned
Pasture Owned
Cows
13.
ACRES
150
150
300
500
400
450
280
500
50 Head
Yield
72 Bu.
72 Bu.
121 Bu.
121 Bu.
32 Bu.
32 Bu.
1.42 Tons
1.1 AUM’s
Gross Retun
Price
$5.25
$5.25
$4.15
$4.15
$11.15
$11.15
$55/Ton
$20/AUM
$1050/Cow
Gross Income
Cost
Net Income
Calculate the projected return over total direct and
overhead costs using the Zimmerman’s projected crop and
livestock plan. Use the prices that are projected and do
not include any projected government payments. (Use Region
3 Average Profit Farms for all farms for the crop and
livestock analysis from your resource unit. Also assume the
pasture costs on the livestock enterprise analysis are
correct, and that all crop expenses are correct, including
land rent, but use the projected prices and yields for both
livestock and crops.)
a.
b.
c.
d.
$112,356
$128,950
$121,357
$22,559
4
14.
Would the rented Barley acres cover the direct cost per
acre if the rent cost was $80/acre (don’t consider
government payments)?
a.
b.
15.
Based on the Zimmerman’s Projected Budget, which crop
listed below has the highest return over direct costs per
acre on owned land (use the average farm on the enterprise
budgets)?
a.
b.
c.
d.
16.
Decrease barley and plant more corn
Decrease corn and plant more barley
Sell cows and plant pasture to corn
All of the Above
Mr. Zimmerman’s son is looking to come back to the farm.
He could rent 200 acres of land from their neighbor for
$90/acre, if he has the same yields and price as his
Father and plants all corn, what is his projected
profit per acre (Use average farm on enterprise budgets)?
a.
b.
c.
d.
18.
Corn
Soybeans
Barley
Hay
Based on the Zimmerman’s Projected Budget, what should they
do to increase their profit, assuming overhead expenses to
be fixed and that they can’t find additional acres?
a.
b.
c.
d.
17.
Yes
No
$-2,386
$-6,784
$-9,442
Can’t tell from the information given
Aaron could sell heifer calves at 600 lbs. for $1.90/lb and
buy bred heifers for $1900.00/head, or he could keep his
own heifers for replacements. Which is a better financial
decision (use average farm on enterprise budgets)?
a.
b.
Keep his own heifers
Buy bred heifers
5
19.
If Aaron would have planted just one crop on all of his
rented acres, which would have given him the greatest Net
Return based off only the average farm in Region 3?
a.
b.
c.
d.
20.
Spring Wheat
Soybeans
Corn
Barley
If 2014 is a poor year for crop conditions and yields
decrease by 20%, will Aaron’s rented corn still be
profitable if prices and costs stay the same?
a.
b.
c.
d.
Yes
No
Maybe
It wasn’t profitable with the original yield
Investment Analysis
The Zimmerman’s have the opportunity to purchase an additional
200 acres of pasture land for the upcoming year for $180,000.
They are looking at 3 different options for financing: 40% down
and 4.0% interest for 10 years, 40% down and 5% interest for 15
years, and 25% and 6% interest for 20 years.
21.
Which option will have the least total cost?
a. 4% Interest
b. 5% Interest
c. 6% Interest
22.
If Aaron expects no immediate return on his down payment,
and the real estate tax is $6/acre, what would his payment
be equivalent to in rent per acre if he chooses the least
total cost option?
a.
b.
c.
d.
$25.33
$53.44
$72.53
$86.43
6
23.
Which option will do the least harm to Aaron’s cash flow in
the first 2 years after the purchase?
a.
b.
c.
24.
How many cows will it take to make the yearly payment with
the least cost option? (Use average profit per cow Region
3)
a.
b.
c.
d.
25.
58
68
78
88
cows
cows
cows
cows
Which purchase option creates the least amount of risk for
Aaron?
a.
b.
c.
d.
26.
4% Option
5% Option
6% Option
4% Option
5% Option
6% Option
Not Enough Information
It is possible that Aaron could rent additional pasture
land for $23/acre. Would he be better off to rent instead
of purchase the land if all he is worried about his his
yearly cash flow plan?
a. Yes
b. No
Mr. Zimmerman has decided it is time to buy a new pickup, he
could purchase a brand new pickup with no trade for $46,000
financed for 5 years at 0% and sell his old pickup for $15,000.
He could also trade his old pickup on the new one for $33,000 to
boot and finance that amount at 4% for 4 years. He could also
trade for a pickup that is 1 year old for $27,000 to boot and
finance that amount at 6% for 3 years.
27.
Which option will have the lowest payment each year?
a. 0% Option
b. 4% Option
c. 6% Option
7
28.
Which option has the least total cost?
a. 0% Option
b. 4% Option
c. 6% Option
29.
Which option would cause the least harm to Aaron’s cash
flow plan for the next 3 years?
a.
b.
c.
30.
At 55 cents per mile, how many miles could Aaron drive a
leased pickup each year and still stay under the lowest
payment option?
a.
b.
c.
d.
31.
10273
11273
12273
13273
Does Aaron have enough total working capital as
1/1/2014 to just purchase the new pickup for $46,000?
a.
b.
c.
d.
32.
0% Option
4% Option
6% Option
Yes
No
Not Enough Information
Just put it on his operating and figure it out later
Projected Cash Flow In Resource Unit
Does Aaron Zimmerman’s Farm Cash Flow for 2014:
a. Yes
b. No
33.
What month begins with the lowest Operating Loan
Balance:
a.
b.
c.
d.
of
December
October
June
May
8
34.
If there is a 10% decrease in gross income over the
year, how will it impact Aaron’s projected Net Farm
Income for 2014?
a.
b.
c.
d.
35.
Change Term Debt Coverage Ratio to 0.54
Change Term Debt Coverage Ratio to 0.68
Change Term Debt Coverage Ratio to 0.90
Won’t change it at all
What is the Zimmerman’s projected Net Cash Flow for 2014?
a.
b.
c.
d
36.
$6,000
$2,000
$7,735
$9,300
What is the Zimmerman’s 2014 projected Net Worth Change?
a.
b.
c.
d.
37.
$
$
$
$
157,695
202,917
72,500
106,815
What are Aaron’s total inventories projected to change
by in 2014?
a.
b.
c.
d.
$ -18,984
$ -6,213
$ -25,197
Can’t tell from the information available
Family Living
Use the information in
answer the questions.
38.
the
resource
information
section
to
Based on the total family living excluding Other nonfarm expenditures for region 3, does the Zimmerman’s
cash flow for family living fall closest to?
a.
b.
c.
d.
Low 20%
High 20%
The average Farm
40-60%
9
39.
Total cash family living and investments and non-farm
capital purchases for the Average of all farms in
Region 3 was:
a.
b.
c.
d.
$
$
$
$
121,873
68,659
91,850
155,573
40. How many cows would Aaron need to cover his projected family
living expenses in 2014? (Use Region 3 average farm for beef
enterprises)
a.
b.
c.
d.
296
302
308
316
MARKETING
Use the Market information in the Resource Information Section.
Assume a negative $0.95 per bushel nearby basis and a negative
$0.85 new crop basis for Corn, a $50/full turn commission for
futures, and a $0.05 per bushel per month carrying charge.
Carrying charge would start on November 1st.
Commission on
feeder cattle is $50 for options for futures and an even basis
for the feeder cattle. The commission for selling the calves at
the local auction is $14.00/head. On April 16, 2014, the
Zimmerman’s had 30000 bushels of corn on hand. Their projected
production for 2014 will give them an additional 98000 bushels
of Corn and 30,500 bushels of Soybeans to sell. Aaron will raise
50 calves that will be weaned on November 1 and will average 600
lbs, and he will background his calves, taking them to 825 lbs
before they are sold at the local auction.
41.
If Aaron contracts his soybeans at Gavilon Grain in
New Rockford, what price can he lock in for his 2014
crop?
a.
b.
c.
d.
$13.33
$12.99
$11.46
$12.36
10
42.
A month ago, Aaron could have sold his old crop cash
corn at Central City Grain for $3.45, if he hauls it
in today, how will the value of his grain have
changed?
a.
b.
c.
d.
43.
$+0.40
$-0.40
$+0.34
$-0.34
The Zimmerman’s can lock in what price for their
feeder cattle as a futures net price if they want to
sell them in March 2015?
a.
b.
c.
d.
44.
How many futures contracts would Aaron need to sell to
price about 75% of his anticipated soybean production for
2014?
a.
b.
c.
d.
45.
$176.25
$175.25
$174.25
$173.25
1
2
3
4
Contract
Contracts
Contracts
Contracts
Aaron’s broker has been trying to talk him into a
speculative trade of coffee. Since he had heard that Mr.
Schneider is going to cut back on his consumption, he
thinks it is a sure bet that the price of coffee will go
down.
If Aaron sells 2 December 2014 contracts today and
buys them back for 188.95 in November how much will he
make? (a coffee contract is 37,500 lbs and price is
expressed in dollars/cwt)
a.
b.
c.
d.
$3,338
$6,675
$6,575
$6,475
11
46.
If Aaron lives 17 miles from Barlow and 8 miles
Carrington, where should he contract his 2014 new
wheat if all factors other than price are the same?
a.
b.
c.
d.
from
crop
Barlow
Carrington
It doesn’t matter they are the same
Whichever town has a better place to stop for lunch
INCOME TAX
Based on the Zimmerman’s Federal Tax Schedule found in the resource
packet:
47.
What is their gross farm income?
a.
b.
c.
d.
48.
What is their Net Farm Income?
a.
b.
c.
d.
49.
$955,323
$888,785
$66,538
Cannot tell from the schedule F
Why does the Zimmerman’s Schedule F appear different than their
Farm Income Statement on Page 1 of the Resource Packet?
a.
b.
c.
d.
50.
$955,323
$888,785
$66,538
Cannot tell from the schedule F
They are trying to hide income on their taxes
Depreciation can be accelerated for tax purposes
They are showing an increase in family living expenses
There is no difference between the two
How Much will the Zimmerman’s owe in Federal Taxes for 2013?
a.
b.
c.
d.
$665.38
$66,538
They Will Get a Refund
You can’t tell by looking only at Schedule F
PAGE 12