Junior and Senior level Ag Bus.
Colorado Agriscience Curriculum
Section:
Advanced Agribusiness
Unit:
Agricultural Business Records
Lesson Title:
Debt Repayment
Colorado Ag
Education
Standards and
Competencies
Colorado Model
Content
Standard(s):
AGB11/12.03 - The student will be able to formulate
and analyze financial records and use the
information for evaluation and planning.
Determine capital debt repayments capacity.
Math Standard 1: Students develop number sense and use numbers and
number relationships in problem-solving situations and communicate the
reasoning used in solving these problems.
Math Standard 6: Students link concepts and procedures as they develop and
use computational techniques, including estimation, mental arithmetic, paperand-pencil, calculators, and computers, in problem-solving situations and
communicate the reasoning used in solving these problems.
English Standard 1: Students read and understand a variety of materials
English Standard 4: Students apply thinking skills to their reading, writing,
speaking, listening, and viewing
English Standard 5: Students read to locate, select, and make use of relevant
information from a variety of media, reference, and technological sources.
Student Learning
Objectives:
Using what they learned in the earlier cash flow lesson, this lesson should be
easy to understand and serve as a refresher on the earlier lesson.
Time:
50 minutes
Resource(s):
All-inclusive, but could reference Financial Statements: Cash Flow lesson.
Instructions, Tools,
Equipment, and
Supplies:
Italicized words are instructions to the teacher, normal style text is suggested
script.
Lesson, computer, LCD projector, handout
Unit 1, Lesson 8: Debt Repayment
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Interest Approach:
Start by showing [Slide 1] and asking the class what they think the
approximate national debt is. The following web link has the national debt
clock on it. An early 2007 clock is pasted onto slide 2. You could update the
slide based on that days, or show this web site if desired.
http://www.brillig.com/debt_clock/ After a few guesses show [Slide 2]. Let
them know that they will be learning about debt repayment today and then
do a Descartes Moment to see what they know.
Using the Descartes Moment (e-moment) ask the following three questions and give
students 1-3 minutes/question to write a letter to themselves. (Descartes was a writer
and philosopher.)
1. Pose the three questions. As you begin the unit or lesson, pose the
following three questions to your students: What do you know about this
topic? What do you think you understand about this topic? What do you
not understand about this topic? Note: You may want to introduce
students to the questions one at a time to focus their thinking.
2. Students write letters to themselves. Students compose a letter to
themselves explaining what they know, what they think they know, and
what they don’t understand about the topic. Allow about one to three
minutes for thinking and writing on each question.
3. Have students share aloud after the first two questions to stimulate other
students’ thinking.
4. Collect the letters. The information is valuable for your lesson planning
and assessment.
Ask,
“What do I know about debt repayment?”
“What do I think I know about debt repayment?”
“What don’t I know about debt repayment?”
Objective 1:
Understand what debt is and why it is important to manage it [Slides
3 & 4]
Discuss material on slide 3 using the Little Professor Moment.
Description
When we teach something we tend to learn it better. During the Little Professor
Moment, portions of the content are taught to half the students at a time. Then,
students take turns being “Little Professors” to their partners. Here’s how you
can set it up.
Process
1. Chunk your lesson. Determine the portions of information. Make the
Unit 1, Lesson 8: Debt Repayment
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2.
3.
4.
5.
6.
portions uniform both in amount and number so that the time spent
teaching each group of students is approximately the same.
Establish roles. Each student exhibits two roles—one while they are
taking notes and one while they wait. While they learn from you, they are
eager learners, full of wonder and interest. While they wait, they are the
“invisible person,” sitting still and neither moving nor speaking. Note:
Some students may find being “invisible” too challenging. Instead of
sitting still and silent, they can read.
Establish personas. Review with students the characteristics of a
stereotypical university professor. As they teach the new material they
act as if they have their PhD in the subject area, and from this point
forward are referred to by their peer as Dr. (fill in their last name). For
ease of teaching, address the first student in each pair as Professor I
and the second student as Professor II.
Teach the first chunk. Little Professor I listens and takes appropriate
notes. Keep this short and to the point. Little Professor I then teaches his
or her partner. This is a timed event! Give them only 30 to 60 seconds to
instruct. Before moving to the second chunk of information, check Little
Professor II’s understanding.
Teach the second chunk. Now it’s Little Professor II’s turn to take notes.
Little Professor II will then teach his or her partner.
Repeat the cycle. Repeat steps 4 through 7 for as many chunks of
information there are.
Debt is that which is owed; usually referencing assets owed. In the case of
assets, debt is a means of using future purchasing power in the present before
income has been earned.
A debt is created when a creditor agrees to loan a sum of assets to a debtor.
Debt is usually granted with expected repayment; in most cases, plus interest.
Discuss material on slide 4 using the Little Professor Moment.
Management of debt is crucial for maintaining financial liquidity and avoiding
undue risk.
Objective 2:
Understanding borrowing [Slide 5]
Discuss material on slide 5 using the Little Professor Moment.
For most farmers, borrowing is essential and provides a major source of funds for
operating the business.
Can work to your advantage at times
Should be avoided at other times
Objective 3:
Understanding Leverage [Slides 6 & 7]
Discuss material on slide 6 using the Little Professor Moment.
Unit 1, Lesson 8: Debt Repayment
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Expressed as a ratio of debt to net worth.
Borrowing (Increasing leverage) can be effective during periods when:
Earnings are relatively good
Interest rates are low
Rate of inflation is high
Under opposite conditions, it’s best to wait for a more opportune time to buy land,
expand an enterprise, or make other capital expenditures
Discuss material on slide 7 using the Little Professor Moment.
The use of borrowed capital to increase the potential return of an investment.
The amount of debt used to finance a businesses assets. A business with significantly
more debt than equity is considered to be highly leveraged.
Review/Summary:
Repeat the Descartes Moment from the Introduction and let the students reassess what they know about debt repayment.
Application-Extended
Classroom Activity:
Use the Excel worksheet to estimate repayment ability. It can be printed as a
handout or students can go to the computer and use it. The formulas have
been included. It is simple addition and subtraction. Another option would be
to use the completed cash flow from the Financial Statements: Cash Flow
lesson and use the totals column to calculate debt repayment ability.
You can also use the Evaluation Tool as the Application – Extended Classroom
Activity.
Application--FFA
Activity:
Farm Management Contest.
Application--SAE
Activity:
When updating record books, have students calculate their debt repayment
ability.
Evaluation:
See Debt Repayment Evaluation. Use Excel Spreadsheet (on computer or
as a handout) for students to complete the Evaluation.
Evaluation Answer
Key:
See Debt Repayment Evaluation Key.
Unit 1, Lesson 8: Debt Repayment
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Other:
Unit 1, Lesson 8: Debt Repayment
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Debt Repayment Activity
Name:__________________________________
Please read the scenario and enter the numbers into the spreadsheet to calculate debt repayment
ability.
I own a farm and have a job in town. My job in town earns me $32,456 per year. The farm has an
average gross annual income of $120,000. The farm’s net income is about $60,000 after expenses are
taken into account. Of the expenses, $15,000 of that is interest expense. Our family living expenses are
$2500 per month. Our machinery loan has an annual payment of $10,000 including interest and the land
payment is $31,973 including interest.
Use the remainder of this piece of paper to do any calculations. Staple this to the spreadsheet and turn it
in.
Unit 1, Lesson 8: Debt Repayment
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