Ag Finance Exam 1

Long planning horizons are needed to deal with risks, evaluate investments, and account for _____ effects. Question 41 options: 1) "life cycle" 2) debt capital 3) equity capital 4) business cycle

"life cycle"

Alpha and Bravo Eagle need to finance a tractor purchase of $70,000. Their lender requires a 25% down-payment. Assume seven annual payments. The interest rate is 7%. Calculate the schedule of interest and principal payments over the life of the loan using the constant payment method and the constant payment on principal method What is the total interest paid over the life of the loan with the constant payment method and the constant payment on principal method? Round to the nearest $1. The CPM is first :: the CPoP result is second. Question 161 options: 1) $14,175:: $15,053 2) $15,053 :: $14,175 3) $15,691 :: $14,700 4) $14,700:: $15,691

$15,691 :: $14,700

Alpha and Bravo purchased a new combine for $56,000. Assume a 7 year useful life and no salvage value. What is the Value of the Depreciation taken during YEAR 5 under each method identified below? Do not use MACRS (no need for a MACRS table). Assume the answers are in the following order: Straight-line, DDB, SOtY. $8,000 :: $6,531 :: $8,000 $8,000 :: $8,329 :: $2,000 $8,000 :: $8,000 :: $8,000 $8,000 :: $4,665 :: $6,000

$8,000 :: $4,665 :: $6,000

Two alternative payment schedules are commonly used to amortize farm loans: Question 154 options: 1) (1) double declining balance payment and (2) constant payment on principal. 2) (1) constant payment and (2) constant payment on principal. 3) (1) constant payment and (2) graduated principal payment . 4) (1) graduated principal payment and (2) double declining balance payment.

(1) constant payment and (2) constant payment on principal.

The income statement reports the profit or loss of a business over a specified period. The format of the income statements used on farming operations usually includes these four sections: Question 39 options: 1) (1) farm revenue, (2) farm expenses, (3) nonfarm adjustments and (4) income taxes. 2) none of the other answers are correct 3) (1) farm revenue, (2) farm expenses, (3) off-farm income and (4) off-farm income taxes. 4) (1) farm revenue, (2) farm expenses, (3) farm-land capital gains or losses and (4) income taxes.

(1) farm revenue, (2) farm expenses, (3) nonfarm adjustments and (4) income taxes.

Four coordinated financial statements are commonly used to assess, monitor, and report the financial performance of a farm business. These statements include: Question 29 options: 1) (1) the balance sheet, (2) the income statement, (3) the statement of cash flows, and (4) the statement of owner equity 2) (1) the balance sheet, (2) the off-farm income statement, (3) the statement of cash flows, and (4) the statement of owner equity 3) (1) the balance sheet, (2) the income statement, (3) the schedule of debt and interest payments, and (4) the statement of owner equity 4) (1) the balance sheet, (2) the off-farm income statement, (3) the schedule of debt and interest payments, and (4) the statement of owner equity

(1) the balance sheet, (2) the income statement, (3) the statement of cash flows, and (4) the statement of owner equity

The balance sheet is commonly separated into five sections. These sections include: (1) current assets, (2) noncurrent or fixed assets, Question 26 options: 1) (3) current liabilities, (4) noncurrent liabilities and (5) owner equity. 2) (3) current liabilities, (4) changes in current liabilities and (5) owner equity. 3) (3) current liabilities, (4) past-due liabilities and (5) owner equity. 4) (3) current liabilities, (4) changes in current liabilities and (5) off-farm income.

(3) current liabilities, (4) noncurrent liabilities and (5) owner equity.

Perform DuPont analysis, given the following annual data from an agricultural business: Return to assets $100,000; value of farm production $400,000 average assets $1 million average; average equity $500,000; interest paid $40,000. Question 46 options: 1) .5; .80; .20; .08; 4; .24 2) .25; .40; .10; .04; 2; .12 3) not enough information to calculate these ratios. 4) .125; .20; .05; .2; .5; .06

.25; .40; .10; .04; 2; .12 (.25= return to assets $100,000 / value of farm production $400,000) (.40 = 400,000/ 1,000,000) (.10 = 100,000/1,000,000) (.04= 40,000/1,000,000) (2= 1,000,000/500,000) (.12= ?)

What is the Coefficient of Variation under both interest rate and growth risk for Zeta & Eta's farm? Pick the closest answer. Debt-to-equity ratio 2.0 ; Expected return on assets 12% ; Expected interest rate on debt 8% ; Consumption rate 60% ; Tax rate 20% ; Standard deviation of return on assets 4% ; and Standard deviation of interest rates 2% Question 142 options: 1) 4.05% 2) 0.60 3) 0.63 4) 3.84%

0.63 (idk but i think its the expected return on assets divided by the standard deviation)

Find the expected loss for a borrower who has a default probability of 3% and a loss-given-default of 50%. Question 109 options: 1) 1.50% 2) 149% 3) 150% 4) 1.49%

1.50%

Using Quiz4_Table2 and Quiz4_Table3, find the expected loss for the risk class determined for Borrower Eta. Assume the loss-given-default is in class 4. Question 113 options: 1) Class 14 2) 1.62 3) 2.40 4) not enough information to determine

1.62

Gamma and Delta Osprey have the following information about their farm: Assets $1,600,000 ; Liabilities $600,000 ; Interest on Debt 9% ; Tax Rate 20% ; Consumption 45% ; Growth Rate on Equity 6.8% What is their rate of return on assets? Question 140 options: 1) 13.03% 2) none of the other answers are correct 3) 10.75% 4) 10.33%

10.75%

Kappa and Lambda Golden have $480,000 of assets and $200,000 of liabilities. Their tax rate is 31%, and their costs of debt and equity are 9% and 14%, respectively. What is the Golden's weighted average cost of capital? Pick the closest answer. Question 138 options: 1) 9.6% 2) 7.53% 3) 10.75% 4) none of the other answers are correct

10.75%

Calculate the value of farm production. Question 47 options: $78,000 $114,900 $90,000 $29,900

114,900

The Grain Inventory has a value of what? Question 12 options: $15,800 $110,000 $14,200 $15,000

15,000 (total current assets- cash investment in growing crops- supplies- prepaid expenses - cash)

Estimate the percent operating expenses and interest expenses can increase and still maintain positive CRDRM. Round to the nearest 0.25% Question 18 options: 1) 0% (at break-even now) 2) 7.5% 3) 17.25% 4) they must go down to achieve break-even

17.25%

Estimate the percent that crop revenue and livestock revenue can decline and still maintain positive CRDRM. Round to the nearest 0.5% Question 16 options: 1) 0% (at break-even now) 2) it has to go up to achieve break-even 3) 25.5% 4) 10.5%

25.5%

Calculate the net farm income from operations. Question 48 options: $40,000 $78,000 $29,900 $114,900

29,900

Calculate the owner equity. Question 49 options: $357,000 $352,500 $325,000 $337,000

352,500

Calculate capital replacement and term debt repayment margin (CRDRM) for Longhorizon Family Ranch, LLC Question 15 options: 1) minus $14,635 2) $37,118 3) $13,745 4) $41,745

37,118

Using Quiz4_Table1, determine the weighted average risk score for a borrower named ETA ( "BORROWER ETA" ) with these characteristics: D/A = .50; CDRC = .91; ROA= 4.1%; Current Ratio = 1.20; Operating Ratio = .80; LTV = .70; and Management skill is average. Question 110 options: 1) 2.25 2) cannot be determined 3) 3 4) 2

4) 2

According to a popular interpretation of the book "A Hitchhikers Guide to the Galaxy", what is the meaning of life? Question 162 options: 1) An Elegy 2) 42 3) HAL9000 4) Meditation

42

There is Accrued Interest in the amount of? Question 13 options: $500 can not determine from the provided information $10,000 $4,000

500

What is the amount of Total Operating Expense? Question 11 options: $68,000 $58,000 $41,500 $31,500

58,000 (crop revenue- net farm income - interest expense

Alpha and Bravo Ranchhander borrow $125,000 on January 15 and $175,000 on April 1 to purchase cattle. The Ranchhanders repay in three equal payments of $100,000 on March 1, June 1 and November 1. Calculate the total interest obligation if the interest rate is 7%, and interest is charged on the daily outstanding balance. Round to the nearest $1 increment. Question 160 options: 1) $6,811 2) $7,219 3) $6,501 4) $6,490

6,501

Given the following information about a Zeta & Eta's farm business: Debt-to-equity ratio 2.0 ; Expected return on assets 12% ; Expected interest rate on debt 8% ; Consumption rate 60% ; Tax rate 20% ; Standard deviation of return on assets 4% ; and Standard deviation of interest rates 2% What is the expected rate at which this firm could grow? Question 141 options: 1) 3.2% 2) 6.4% 3) 9.6% 4) none of the other answers are correct

6.4%

Calculate capital replacement and term debt repayment capacity for Longhorizon Family Ranch, LLC. Question 17 options: 1) $67,008 2) $62,381 3) $64,962 4) $69,444

67,008

The financial information for Alpha and Beta Eagle are stated below. Assets $620,000 ; Liabilities $360,000 ; Returns to assets $68,200 ; Interest expense on debt $27,000 ; Income taxes $10,300 ; Consumption withdrawals $25,000 What is the rate of growth of equity capital? Question 139 options: 1) 9.6% 2) none of the other answers are correct 3) 10.75% 4) 7.53%

7.53%

Calculate total farm operating expenses. Question 50 options: $65,000 $78,000 $29,900 $114,900

78,000

Alpha and Bravo Farmfamily borrow $175,000 on March 15. Alpha and Bravo expect to repay $100,000 on October 15 and the remaining balance on November 15. Calculate the total interest obligation if the interest rate is 8% and interest is charged on the daily outstanding principal balance. Round to the nearest $1 increment. 1) $10,500 2) $14,000 3) $8,718 4) $8,721

8,718

What is the average cost of capital when the after-tax cost of debt is 8%, the cost of equity is 12%, and the ratio of equity to assets is 0.40? Question 137 options: 1) 10.75% 2) 9.6% 3) none of the other answers are correct 4) 7.53%

9.6% (idk again but i think after tax cost of debt times the cost of equity)

What is the value of the Deferred Portion of non-current debt? Question 14 options: $138,500 $0 (it is all current) $90,000 $3,500

90,000 (owners equity-current portion of noncurrent debt- net farm income from operations - interest expense- notes payable)

The costs arising from structuring, administering, and enforcing loan contracts in order to reconcile the different objectives and keep both parties well informed are called: Question 79 options: 1) operating expenses of the borrower 2) Government Sponsored Agency costs (GSE) 3) none of the other answers are correct 4) Agency costs

Agency costs

A financial flowchart of a business is based on several key financial statements and related activities from the beginning to the end of the year Which of the following statements are not true? Question 45 options: 1) The business incurs cash flows from transactions during the year, recorded in operating, investing, and financing categories. 2) An accrual income statement records the retained earnings from the past accounting period arising only from expenses, non-farm adjustments, taxes, and family consumption (capital gains and losses also may be considered). 3) The firm's balance sheet records the assets it owns and the financial claims by debt and equity on these assets. Other assets may be leased for some period of time. 4) if all of the other answers are true, select this answer

An accrual income statement records the retained earnings from the past accounting period arising only from expenses, non-farm adjustments, taxes, and family consumption (capital gains and losses also may be considered).

_____ are commonly used to quantitatively evaluate the future direction of a firm. Emphasis is typically placed on _____ , cash flow, and investment analyses. Question 35 options: 1) Analytical methods :: protecting enterprise investors 2) Analytical methods :: protecting lenders only 3) Analytical methods :: enterprise analysis 4) Analytical methods :: protecting investors

Analytical methods :: enterprise analysis

The statement of owner equity reconciles the change of net worth from one period to the next. The major components of the statement are changes in owner equity resulting from: Question 24 options: 1) changes in deferred earnings, contributed capital, and market valuation. 2) changes in retained earnings, impaired capital, and market valuation. 3) changes in retained earnings, contributed capital, and market valuation. 4) changes in deferred earnings, impaired capital, and market valuation.

Changes in retained earnings, contributed capital, and market valuation

Many financial ratios are interrelated and should be treated as a system. A technique called _____ uses the interrelationships to analyze the components and linkages of a business. Question 54 options: 1) Monsanto analysis 2) Dupont analysis 3) McKinsey analysis 4) Donaldson Lufkin analysis

Dupont analysis

The firm's growth rate can be constrained by external financing. ____ occurs when a borrower has exhausted all sources of loanable funds but still finds that the ____ of resources acquired with ____ capital exceeds the marginal cost of borrowing. Question 134 options: 1) External credit rationing :: marginal physical product :: equity 2) External credit rationing :: marginal value product :: borrowed 3) Internal credit allocation :: marginal physical product :: borrowed 4) Internal credit allocation :: marginal value product :: equity

External credit rationing :: marginal value product :: borrowed

Calculate the "Net farm income from operations ratio" change from 2009 to 2010 Question 1 options: 1) increase 7.5 2) increase 5.4 3) decrease 5.4 4) decrease 7.5

Increase 7.5

The ______ based on loan characteristics such as collateral, loan guarantees, and seniority of the lender's debt claim. Question 84 options: 1) Loss-given-default is 2) Credit officer's decisions are primarily 3) all of the other answers are always correct 4) Borrower's decisions are primarily

Loss-given-default is

_____ valuation is beneficial with security valuation and current wealth measurement, while _____ valuation is useful for maintaining consistency among financial statements over time. Question 21 options: 1) none of the other answers are correct 2) cost :: market 3) market and cost are interchangeable 4) Market :: cost

Market :: cost

Accounting of income on agricultural operations can be reported on a cash basis and accrual basis. All of the following are correct except: Question 38 options: 1) On a cash basis, revenue received and expenses paid comprise the cash received and paid during the year. 2) On an accrual basis, revenue and expenses represent the value of items the business produced and expenses incurred during the year. 3) Reporting of income to the Internal Revenue Service is the primary use of the Accrual basis reporting of income. 4) Accrual accounting provides a more accurate assessment of profitability, and thus should be used in most cases.

Reporting of income to the Internal Revenue Service is the primary use of the Accrual basis reporting of income.

_____ is a procedure used to derive a risk efficient set. The risk programming procedure finds the combinations of assets or enterprises that _____ for different levels of expected return. Question 97 options: 1) Risk programming :: maximize portfolio variance 2) Hedging :: minimize portfolio variance 3) Risk programming :: minimize portfolio variance 4) Hedging :: maximize portfolio variance

Risk programming :: minimize portfolio variance

Are Borrower Eta's characteristics relatively strong or weak? Question 111 options: 1) a bit on the weak side (relatively weak credit) 2) depends on macroeconomic conditions 3) a bit on the strong side (relatively good credit) 4) not enough information to assess

a bit on the weak side (relatively weak credit)

Loan risk analysis from a lender's standpoint involves repayment capacity (_____ ) and loan security (_____ ). Question 157 options: 1) by the borrower :: by the lender 2) a trivial concern :: a major concern 3) a liquidity characteristic :: a risk characteristic 4) a liquidity characteristic :: by the lender

a liquidity characteristic :: a risk characteristic

In developing an optimal loan program, a borrower would prefer: (1) _____, and (2) a repayment pattern over time that matches the assets' earnings pattern. The result is a set of self-liquidating loans. Question 144 options: 1) a maturity structure of debt at least 125% the length of the payoff periods for the assets being financed 2) a maturity structure of debt no more than 75% of the length of the payoff periods for the assets being financed 3) a maturity structure of debt that matches the length of the payoff periods for the assets being financed 4) a rolling maturity structure of so the borrower can replace the assets being financed

a maturity structure of debt that matches the length of the payoff periods for the assets being financed

The ______ consists of separate borrowing transactions and notes each time financing is needed. Question 150 options: 1) none of the other answers are correct 2) a standard operating loan 3) a nonrevolving line of credit 4) a revolving line of credit

a standard operating loan

The three types of operating loans used to finance operating inputs are: (1) _____, (2) a nonrevolving line of credit, and (3) a revolving line of credit. Question 149 options: 1) a standard operating loan 2) a standard 30 year mortgage loan 3) a standard conventional mortgage loan 4) none of the other answers are correct

a standard operating loan

The total variance is expressed as Question 107 options: 1) σp^2 = w1*σ1^2 + w2*σ2^2 + 2*w1*w2*σ1^2*σ2^2*ρ1,2 2) σp^2 = w1*σ1^2 + w2*σ2^2 + 2*w1*w2*σ1,2^2 3) Portfolio_variance = (asset1_weight^2*asset1_variance) + (asset2_weight^2*asset2_variance)+ (2 * asset1_weight * asset2_weight*assets1_2_covariance) 4) all of the other answers are correct

aal of the other answers are correct

Higher leverage can ____ the growth rate of equity capital, ____ the risk of loss of equity. Question 115 options: 1) decrease :: but also decrease 2) accelerate :: but also decrease 3) decrease :: but also increase 4) accelerate :: but also increase

accelerate :: but also increase

Tax deductibility favors the use of debt while ____ costs favor the use of equity. Question 122 options: 1) administrative, agency, and bankruptcy 2) administrative, interest expense, and ownership 3) administrative, interest expense, and bankruptcy 4) interest expense, ownership, and bankruptcy

administrative, agency, and bankruptcy

The major sources of business risk in agriculture reflect some level of _____ for a firm. Question 89 options: 1) speculation 2) none of the other answers are correct 3) adversity or potential loss 4) over-extension

adversity or potential loss

Measures of repayment capacity include interest coverage ratio, capital debt repayment capacity, and which of the following? Question 65 options: 1) replacement margin coverage ratio. 2) all of the other answers are common measures of repayment capacity. 3) capital debt repayment margin 4) the term debt and capital lease ratio

all of the other answers are common measures of repayment capacity.

Specific performance measures are classified by Question 51 options: 1) repayment capacity 2) all of the other answers are correct 3) Profitability and efficiency 4) Liquidity and solvency

all of the other answers are correct

Seven Steps are systematically expressed in the control process. These include: (1) identifying goals, (2) developing measures for the goals, (3) _____, (4) _____, (5) _____, (6) _____ (7) ____ . Question 58 options: 1) developing an information system :: identifying and implementing corrective actions 2) selecting and administering the analytical and diagnostic tools 3) determining norms for the measures :: setting tolerance limits on norms 4) all of the other answers are part of the seven steps

all of the other answers are part of the seven steps

The financial analysis and control process involves the use of new information that is fed back to the decision-making unit for processing, _____ . Question 59 options: 1) and external reporting 2) analysis and response. 3) and compensation calculations 4) lender compliance

analysis and response.

Efficiency measures compare inputs relative to outputs in the production process. Efficiency measures are useful in monitoring the performance and profitability of the farm. A common measure of efficiency is the _____ . Question 70 options: 1) asset replacement ratio. 2) asset turnover ratio. 3) apple turnover ratio. 4) asset to working capital ratio.

asset turnover ratio.

Under a nonrevolving line of credit, the lender agrees to supply the operating loan funds ______ indicated in a _____ . Question options: 1) at the lender's discretion :: projected cash flow budget 2) at the times and in the amounts :: projected capital budget plan 3) at the times and in the amounts :: projected cash flow budget 4) at the lender's discretion :: projected capital budget plan

at the times and in the amounts :: projected cash flow budget

Lender-borrower relationships are represented by close ties between the parties to a loan contract. The lender is especially interested in ensuring the borrower is not a greater risk than believed when the loan was established, and that the ______ does not take on greater risks during the term of the loan. Question 71 options: 1) credit officer 2) borrower 3) none of the other answers are correct 4) securitization agent

borrower

In the development of business plans for an agricultural business, it is important to determine and assess the linkages among: (1) financial statement information and ___ Question 143 options: 1) the design of financing programs 2) the assessment of financial feasibility. 3) neither A or B are relevant to this question 4) both A and B are important and relevant to this question.

both A and B are important and relevant to this question

When leverage increases, ____ increase. Question 123 options: 1) none of the other answers are correct 2) only debt but not equity costs will 3) both debt and equity costs will 4) neither debt or equity costs will

both debt and equity costs will

Traditional ____ in agriculture arise from production, markets, technological and legal changes, and from contractual and personnel performance. Question 33 options: 1) uncontrolled risks 2) interest rate risks 3) business risks 4) life-cycle risks

business risks

The growth rate of a firm is also affected ____ for the firm's products. Pick the best answer. Question 136 options: 1) by just the marginal international demand 2) by (the entire) market demand 3) none of the other answers are correct 4) by just the federal subsidies

by (the entire) market demand

Farm expenses include farm operating expenses and interest expenses. Farm operating expenses include _____ for all inputs _____ that are used in production during the period. Question 20 options: 1) cash and noncash outlays :: purchased (only) 2) cash and noncash outlays :: leased (only) 3) cash and noncash outlays :: purchased or hired 4) cash outlays actually experience :: purchased or hired

cash and noncash outlays :: purchased or hired

Some key income tax issues for ag businesses involve _______ of accounting for farmers, the allowable methods of depreciation, and reporting of capital gains. Question 31 options: 1) none of the other answers are correct. 2) IASB Standards 3) cash versus accrual methods 4) land acquisition methods

cash versus accrual methods

Using Quiz4_Table2, determine the risk class for Borrower Eta's characteristics. Question 112 options: 1) Class 11 (10.6) 2) Class 10 (9.8) 3) Class 9 (9.8) 4) Class 10 (10.6)

class 10 (9.8)

The relative risk for a given level of leverage is shown by the ____ Question 10 options: 1) none of the other answers are correct 2) compounded variation 3) coefficient of variation 4) compounded growth valuation

coefficient of variation

Several types of comparisons occur with the measures of business performance. Which one of the following is not a common measure? Question 55 options: 1) comparisons with norms and tolerance limits 2) comparisons with RAROC available in other industries to ensure efficient capital use 3) comparisons over time to identify important patterns or trends that may indicate a need for corrective actions 4) comparisons with other firms to assess peer performance

comparisons with RAROC available in other industries to ensure efficient capital use

An efficient information system improves financial _____, _____ management, meeting legal requirements, and ______. Question 28 options: 1) planning :: debt :: equity planning 2) control :: debt :: equity planning 3) control :: risk :: financial planning 4) control :: debt :: financial planning

control :: risk :: financial planning

The food, fiber, and renewable energy system is composed of a set of _____ stages that transform raw products into saleable commodities that are then processed into consumable food, fiber, and food products for delivery and ultimate sale to consumers. 1) disparate 2) none of the other answers are correct 3) coordinated 4) mandated

coordinated

Different methods of valuation are used to represent balance sheets. With _____ valuation, assets are valued at their original cost less any accumulated _____. Question 40 options: 1) cost-basis :: depreciation 2) cost-basis :: asset growth 3) market-basis :: depreciation 4) market-basis :: asset growth

cost-basis :: depreciation

Profitability considers the difference between the value of goods produced by the firm and the _____ used in their production. Question 52 options: 1) costs of only the leased resources plus interest costs 2) costs of only the leased resources 3) costs of all resources 4) costs of only the purchased resources

costs of all resources

A two-asset portfolio's total variance is the sum of the individual, proportional variances plus the _____ . Question 106 options: 1) covariance 2) standard deviation 3) none of the other answers are correct 4) negative of the correlation

covariance

Positive (negative) _____ indicates that high profits in one investment are associated with _____ profits in another investment. Zero _____ indicates that there is no statistical association between the variations of returns of two investments. Question 94 options: 1) standard deviation :: risky (no risk) :: standard deviation 2) standard deviation :: high (low) :: standard deviation 3) covariation :: high (low) :: covariation 4) covariation :: risky (no risk) :: covariation

covariation :: high (low) :: covariation

Efficient information systems provide information about _____ and management ability to _____ . Question 36 options: 1) creditworthiness :: lenders 2) lenders :: equity owners 3) creditworthiness :: outside borrowers 4) lenders :: outside borrowers

creditworthiness :: lenders

Calculate the change from 2009 to 2010 for the Current Ratio and the Debt-to-Equity Ratio Question 5 options: 1) Current Ratio = decrease 0.47 :: Debt-to-Equity = decrease 0.02 2) not enough information to determine this answer 3) Current Ratio = decrease $21,107 :: Debt-to-Equity = decrease 0.01 4) Current Ratio = increase 0.47 :: Debt-to-Equity = increase 0.02

current ratio = decrease 0.47 :: Debt-to-Equity = decrease 0.02

Repayment capacity is the ability of the firm to meet _____ obligations. Question 63 options: 1) noncurrent debt and capital lease 2) current year production debt and capital lease 3) debt and capital lease 4) current year production debt and machinery lease

debt and capital lease

Financial leverage or capital structure is the combination of a firm's debt and equity capital. The sources of financing of the firm's assets are ____ . Question 119 options: 1) co-ops and banks 2) debt and equity 3) non-farm investors and local lenders 4) banks and insurance companies

debt and equity

Financial capital refers to the ____ claims comprising the ____ of the firm's balance sheet. Question 118 options: 1) depreciation :: liability and equity side 2) debt and equity :: liability and equity side 3) debt and equity :: asset side 4) depreciation :: asset side

debt and equity :: liability and equity side

Using Common Size Statement methods, what was the change from 2009 to 2010 for the Total Current Assets category? Question 2 options: 1) increase 3 percent 2) decrease 3.6 percent 3) decrease 3 percent 4) increase 3.6 percent

decrease 3.6 percent

Income statement components include non-depreciation operating expenses, _____, interest expense and net farm income from operations. Question 69 options: 1) depreciation expense 2) inflation measures 3) Sharpe ratio reports 4) interest rate forecasts

depreciation expense

Risk management involves three phases: (1) _____ to cope with risks; (2) _____ and their specific uses when adversity occurs; and (3) _____ to implement the risk strategies when distress conditions have passed. Question 91 options: 1) designing strategies :: implementing risk responses :: restoring the firm's capacity 2) choosing a management firm :: depositing initial margin :: meeting margin calls 3) designing strategies :: buying crop insurance :: filing claims 4) designing strategies :: implementing hedging programs :: meeting margin calls

designing strategies :: implementing risk responses :: restoring the firm's capacity

The portfolio model indicates how _____ investments may reduce an investor's risk more than having a _____ . Question 92 options: 1) emerging market :: domestic portfolio 2) different combinations of :: single investment. 3) concentrating :: diversified portfolio 4) none of the other answers are correct

different combinations of :: single investment.

Holding combinations of investments is called _____ . The potential for risk reduction is determined by (1) the number of investments held, (2) their relative proportions or concentration in the portfolio,(3) _____ of the individual investments and (4) possible changes in levels of costs and returns per unit of investment as a result of diversifying. Question 93 options: 1) diversification :: correlations among the expected returns 2) ESG investing :: ESG attenuation 3) ESG investing :: correlations among the expected returns 4) diversification :: ESG attenuation

diversification :: correlations among the expected returns

Greater flexibility in the business organization enables the manager to respond more quickly as new information becomes available to the firm. Flexibility _____ reduce risk. Question 103 options: 1) always does 2) does not directly 3) none of the other answers are correct 4) never does

does not directly

Depreciation is an accounting procedure that prorates the purchase cost of a depreciable asset over its projected _____ life. The information needed to estimate depreciation includes original cost (OC), _____ and estimated salvage value (SV). Question 34 options: 1) profitable :: projected years of useful life (N) 2) profitable :: projected years of related debt service (N) 3) economic :: projected years of useful life (N) 4) economic :: projected years of related debt service (N)

economic :: projected years of useful life (N)

The "pull" incentive for economic growth focuses on achieving ____ and enhanced income generating capacity through business growth and ____ . Question 130 options: 1) economies of scope :: efficient labor utilization. 2) economies of size :: efficient labor utilization. 3) economies of size :: efficient operation. 4) marginal average input use :: efficient operation.

economies of size :: efficient operation.

Balloon payment loans are generally short-term loans (e.g., five years). However, the payments during the loan period are usually based on a longer amortization period (e.g., 10 to 30 years). At loan maturity, the entire unpaid balance of the loan is due. Question 155 options: 1) loan commonly defaults because the amortization did not match the term 2) none of the other answers are correct 3) just the interest is due since the principal has been amortized 4) entire unpaid balance of the loan is due.

entire unpaid balance of the loan is due.

The revenue generated from the production and/or sales of farm and ranch commodities is reported in the _____. Question 25 options: 1) none of the other answers are correct 2) market risk section 3) farm revenue section 4) current accounts section

farm revenue section

The trade-off or equilibrium theory explanation of a firm's capital structure is based on factors that ____ , the use of debt. Question 121 options: 1) trade off dividend income vs 2) favor, versus constrain, 3) trade off economies of scope vs 4) none of the other answers are correct

favor, versus constrain,

Cost of capital refers to the costs a firm incurs for its ____ . Question 117 options: 1) long term capital only 2) social capital 3) financial capital 4) state capitol

financial capital

The relationship between ____ and risk is expressed by extending the growth model to account for both the expected rate of growth and ____ . Question 6 options: 1) financial leverage :: its interest cost 2) equity capital :: its variability 3) none of the other answers are correct 4) financial leverage :: its variability

financial leverage :: its variability

In financial management, growth measures can be ____ , and may focus on ____ . Question 127 options: 1) debt and equity:: interest and dividends 2) financial or physical:: sales and marketing 3) financial or physical:: inputs or outputs 4) debt and equity :: sales and marketing

financial or physical:: inputs or outputs

The financial management of a business, agency, household, or another economic unit involves the acquisition and use of ____ from various sources of risk. Question 19 options: 1) none of the other answers are correct 2) equity capital and the protection of lenders exposure 3) financial resources and the protection of equity capital 4) financial resources and the protection of lenders exposure

financial resources and the protection of equity capital

Borrower shares directly in the returns generated by a business, whether high or low; however, the lender is entitled to a ______ , and is mainly concerned about the safety of this claim. Question 78 options: 1) fixed interest claim 2) participation claim in default cases 3) none of the other answers are correct 4) hybrid claim for high risk cases

fixed interest claim

Key attributes of loss are the ______ of default and ______ of loss when default occurs (loss-given-default). Question 76 options: 1) none of the other answers are correct 2) size :: the probability 3) frequency :: the severity 4) probability :: reputation risk

frequency :: the severity

The "push" incentive for economic growth involves the manager seeking growth to ____ . Question 129 options: 1) none of the other answers are correct 2) maximize dividend payouts 3) fully exploit labor resources 4) fully exercise management ability

fully exercise management ability

The primary measures used to assess profitability are include all of the following except: Question 68 options: 1) rate of return on farm assets and rate of return on farm equity 2) gross farm revenues and the gross non-farm revenues 3) net farm income 4) cost of farm debt and the operating profit margin ratio

gross farm revenues and the gross non-farm revenues

Marketing alternatives provide other methods of risk management for farmers. Sequential marketing, _____ , forward contracting, listed commodity derivatives and _____ are responses to price risks faced by farmers and ranchers. Question 102 options: 1) hedging:: vertical coordination 2) buying call options to hedge crops in the field :: selling farm production as soon as it is available 3) buying call options to hedge crops in the field :: vertical coordination 4) all of the other answers are correct

hedging:: vertical coordination

Operating inputs are generally "used up" or converted into other forms during production. They are highly divisible and tend to have ______ associated with _____ . Question 146 options: 1) low marginal-value products :: the first few units of use. 2) increasing rates of increase in marginal-value product :: the largest users . 3) increasing rates of increase in marginal-physical product :: the largest users . 4) high marginal-value products :: the first few units of use.

high marginal-value products :: the first few units of use.

A problem with enterprise diversification is the loss _____ and returns from specialized production. These losses, called _____ and scope, may outweigh the value of any risk reduction from diversification. Question 101 options: 1) in efficiencies :: diseconomies of scale 2) risk capital :: declining marginal economies of slope 3) in efficiencies :: declining marginal economies of slope 4) all of the other answers are correct

in efficiencies :: diseconomies of scale

Use the Common Size Statement methods to determine the change from 2009 to 2010 for the Current Portion of Short-Term Debt category. Question 4 options: 1) increase 0.5 percent 2) decrease 0.5 percent 3) decrease 0.7 percent 4) increase 0.7 percent

increase 0.5 percent

Using the methods of a Common Size Statement, what was the change from 2009 to 2010 for the Machinery and Equipment category? Question 3 options: 1) decrease 3 percent 2) decrease 3.6 percent 3) increase 3 percent 4) increase 3.6 percent

increase 3 percent

Methods to improve _____ flows for an agricultural business are essential. Internal accounting, production, _____, and legal information are needed, as well as information from the external environment. Question 43 options: 1) marketing :: debt plan 2) none of the other answers are correct 3) information :: debt plan 4) information :: marketing

information :: marketing

The control process provides an orderly framework for responding to an uncertain environment. The design of _____ and strategies for responding to risk are important parts of the control process. Question 53 options: 1) hedging systems 2) information systems 3) marketing systems 4) insurance programs

information systems

The cost of debt financing is ____ ; and the cost of equity financing is ____ . Question 120 options: 1) dividend income :: profit shares 2) interest payments :: interest income 3) interest payments :: profit shares 4) interest income :: dividend income

interest payments :: profit shares

The desired location on a risk efficient set is determined by the _____ . Question 98 options: 1) investor's level of risk aversion. 2) investor's ability to understand options. 3) investor's ability to make margin calls. 4) all of the other answers are correct

investor's level of risk aversion.

Increasing financial leverage generally increases the rate of growth in equity when the marginal returns from the use of a loan exceed the costs of borrowing. This relationship is shown using the growth model (equation) where: g ____; k is (1-t)(1-c); r is the average net rate of return (except for interest (i) and taxes (t) ) on total assets owned by the firm; "i" is the average interest rate paid on debt; t is the average rate of income taxation; c is the average rate of withdrawals for family consumption; Pa is ____, and Pd is the ratio of debt to equity. Question 8 options: 1) is the rate of growth of equity capital:: is the ratio of assets to equity. 2) is the rate of growth of debt capital:: is the ratio of assets to equity. 3) is the rate of growth of equity capital:: is the ratio of assets to debt. 4) is the rate of growth of debt capital:: is the ratio of assets to debt.

is the rate of growth of equity capital :: is the ratio of assets to equity

Fixed assets have unique financing characteristics. The primary fixed asset in agriculture is _____ . A primary source of income for repaying a farm real estate debt is _____ . Question 153 options: 1) land:: capital gains on excess land 2) land:: retained earnings 3) technology:: retained earnings 4) technology:: capital gains on excess land

land:: retained earnings

Financial risk refers to the repayment risk associated using debt and _____. Question 44 options: 1) equity capital 2) inherited capital 3) owned capital 4) leased capital

leased capital

Credit risk assessments allow ratings of borrowers according to their potential default on loans and the ______ if default occurs. Question 72 options: 1) speed of bankruptcy 2) none of the other answers are correct 3) level of loss 4) magnitude of court costs

level of loss

Risk rating systems may focus on a separate or combined consideration of a borrower' s potential loan default and ______ . Question 80 options: 1) level of loss given default 2) none of the other answers are correct 3) personal medical history 4) personal work history

level of loss given default

Levels of _____ and the extent of diversification may jointly affect the level of risk and _____ Question 99 options: 1) leverage :: probability of success 2) leverage :: avoiding margin calls 3) both blanks are irrelevant since futures are gambling 4) none of the other answers are correct

leverage :: probability of success

Proper financing of a depreciable asset should synchronize the _____ and repayment schedule to the _____ of the asset. Question 152 options: 1) loan maturity :: salvage value 2) loan interest rate :: cash generated 3) loan maturity :: cash generated over the life 4) loan interest rate :: salvage value

loan maturity :: cash generated over the life

The probability of default and the ______ are combined to determine the expected loan loss. Question 81 options: 1) loss-given-default 2) personal work history 3) all of the other answers are correct 4) personal medical history

loss-given-default

Lower correlations generally mean _____ portfolio risk. Question 108 options: 1) lower 2) random 3) none of the other answers are correct 4) higher

lower

Risk dominance occurs when the variance of one asset, or a portfolio of assets, is _____ than the variance of another asset, while the first asset has _____ . The dominating (lower variance) asset or portfolio generally is preferred by _____ , to the dominated (higher variance) asset or portfolio. Question 96 options: 1) higher :: an equal or greater expected rate-of-return:: risk seeking investors 2) lower :: an equal or greater expected rate-of-return:: risk averse investors 3) lower :: an equal or lower expected rate-of-return:: risk averse investors 4) higher :: an equal or lower expected rate-of-return:: risk seeking investors

lower :: an equal or greater expected rate-of-return:: risk averse investors

Repayment capacity also measures the cash flow available to _____ after _____ have been satisfied. Question 61 options: 1) make payments on mortgage debt :: all production loan obligations 2) none of the other choices are correct 3) make investments :: all debt obligations 4) make investments :: all mortgage debts

make investments :: all debt obligations

The major sources of business risk in agriculture are 1) production and yield risk, 2) _____ , 3) losses from severe casualties and disasters, 4) social and legal risks from changes in tax laws, government programs, and trade agreements, 5) _____ ; and 6) risks of technological change and obsolescence. Question 88 options: 1) market :: price risk 2) none of the other answers are correct 3) market and price risk :: counterparty default risk 4) market and price risk :: human risks in the performance of labor, contracts, and management

market and price risk :: human risks in the performance of labor, contracts, and management

Financial analysis and control are facilitated by the process of measuring and ____ the performance of a business over time to _____ performance. Question 66 options: 1) monitoring :: report to lenders our 2) monitoring :: maintain desired standards of 3) monitoring :: measure our forecasts for 4) monitoring :: maintain strict control of

monitoring :: maintain desired standards of

Two formats are commonly used in reporting farm revenue: (1) value of farm production and (2) gross revenue. The value of farm production approach includes a deduction for feed and market livestock purchases. This deduction allows for _____ comparisons among different sizes and types of farming operations than does gross revenue. Question 30 options: 1) more valid 2) they produce the same results 3) less valid 4) none of the other answers are correct

more valid

In the two-asset case, the _____ is rp = (r1 * P1 ) + (r2 * P2 ) where r1 and r2 are the expected rates-of-return of two investment alternatives, and PI and P2 are the _____ two alternatives. Question 105 options: 1) portfolio expected return :: proportions of total resources invested in the 2) none of the other answers are correct 3) portfolio expected return :: prices of the 4) standard deviation :: proportions of total resources invested in the

portfolio expected return :: proportions of total resources invested in the

Financial responses to risk refer to a firm's capacity to bear risks in _____ , marketing, and _____ , and to spread these risks among the financial claimants on the firm. Financial responses to risk involve the management of leverage, liquidity and formal insurance. These actions affect both the firm's assets and its liabilities. Question 104 options: 1) production:: financing 2) futures markets :: off-farm labor 3) futures markets :: financing 4) production:: off-farm labor

production:: financing

Changes in technology can alter the ____ of resources and perhaps increase the earning potential of new investments. As financial growth occurs, lags may occur in the adjustment of management to new technology and increased size of business. The lags in management may severely jeopardize the firm's financial position, especially when ____ the firm's liquidity. Question 133 options: 1) productivity :: a large investment reduces 2) availability :: a large investment reduces 3) productivity :: a lack of investment reduces 4) availability :: a lack of investment reduces

productivity :: a large investment reduces

Decisions about leverage profoundly affect expected ____ . Question 114 options: 1) none of the other answers are correct 2) profitability, compensation, and reputation 3) profitability, risk, and liquidity 4) profitability, compensation, and liquidity

profitability, risk, and liquidity

Pro forma statements are ______ . Question 42 options: 1) projections of financial reports. 2) largely disregarded by lenders. 3) restatements of previous years to match current crop prices. 4) none of the other answers are correct.

projections of financial reports.

The rate of return on farm assets is the weighted average of the rate of return on farm equity and the cost of debt. The weights are the _____ . Question 56 options: 1) proportions of equity to assets to long term debt 2) proportions of equity to assets and debt to assets. 3) proportions of liquid assets to short term debt 4) proportions of equity to assets and only long-term debt to assets.

proportions of equity to assets and debt to assets.

The firm's desirable ____ will be greater than the ____ growth under external credit rationing. Question 135 options: 1) indebtedness :: revenue supported 2) rate of growth :: financially supported level of 3) indebtedness :: financially supported level of 4) rate of growth :: revenue supported

rate of growth :: financially supported level of

The pecking order theory for a firm's capital structure suggests a business has a preferred hierarchy or "pecking order" for various sources of financial capital. Capital structure thus ____ financing decisions. Question 124 options: 1) reflects the accumulated effects of future 2) is indifferent to the accumulated effects of previous 3) reflects the accumulated effects of previous 4) none of the other answers are correct

reflects the accumulated effects of previous

Collateral risk refers to the _____ and the outstanding loan balance. Question 158 options: 1) liability for damage to properties next to the farm (collateral damage) 2) inverse behavior of interest rates on loans and the price of loans 3) none of the other answers are correct 4) relationship between the values of assets pledged as security for a loan

relationship between the values of assets pledged as security for a loan

Credit risk assessment is based on borrower characteristics such as ______ , liquidity, profitability, solvency, and financial efficiency. Question 83 options: 1) personal medical history 2) repayment capacity 3) all of the other answers are correct 4) personal work history

repayment capacity

The pecking order theory includes a primary preference for ____ , then ____ equity. Question 125 options: 1) debt :: retained earnings and finally external 2) debt :: internal equity and finally external 3) retained earnings :: debt and finally external 4) retained earnings :: internal equity and finally external

retained earnings :: debt and finally external

A _____ is comprised of the portfolios of assets that _____ for different levels of expected returns. Question 95 options: 1) Profit maximizing set :: minimize variance 2) Profit maximizing set :: maximizes profits 3) risk efficient set :: maximizes profits 4) risk efficient set :: minimize variance

risk efficient set :: minimize variance

Each loan characteristics must be measured and weighted by importance in order to determine a borrower's ______ . Borrowers then are grouped into classes for purposes of credit evaluation, loan pricing, and monitoring. Question 85 options: 1) hierarchy 2) risk rating 3) financial acumen 4) none of the other answers are correct

risk rating

A plan is considered financially feasible if it satisfies the financing terms and performance criteria agreed upon by the borrower and the lender. The major performance criteria are profitability, _____ . Question 156 options: 1) adverse selection, and liquidity risk 2) none of the other answers are correct 3) liquidity risk, and risk of capital impairment 4) risk, and liquidity

risk, and liquidity

This risk-return trade-off means that the optimal level of leverage will differ among farm businesses depending on the decision makers' ____ , and expectations about ____ . Question 116 options: 1) risk-return attitudes :: future capital expenditures 2) risk-return attitudes :: returns and costs 3) future capital expenditures :: returns and costs 4) risk-return attitudes :: market prices for farm products

risk-return attitudes :: returns and costs

Information about credit risk aids in making a loan and ______ the loan once it is made. Question 77 options: 1) irrelevant 2) is too late 3) none of the other answers are correct 4) safeguarding

safeguarding

Risk management involves the _____ for countering business and financial risks in order to meet a decision maker's _____ . Lower risk is generally associated with a reduction in expected returns. Thus, it is important to account for the _____ in designing risk management strategies. Question 90 options: 1) selection of partners :: profit goals :: time commitment 2) selection of methods :: profit goals :: risk-return trade-off 3) selection of partners :: risk-averting goal :: risk-return trade-off 4) selection of methods :: risk-averting goal :: risk-return trade-off

selection of methods :: risk-averting goal :: risk-return trade-off

A single risk rating system addresses the combined effects of frequency and severity; a dual risk rating system ______ . Question 82 options: 1) is designed to keep bank regulators happy 2) does not add a lot of useful or timely information 3) all of the other answers are correct 4) separates the measurement of frequency and severity

separates the measurement of frequency and severity

The risk rating process is based on a combination of financial measures and ______ . Question 73 options: 1) none of the other answers are correct 2) review of borrower's medical history 3) sound judgment 4) review of borrower's social media

sound judgment

The strategic management process has several interrelated steps: Defining and developing a firm's mission; formulating objectives; assessing the firm and evaluating the environment; building strategy; implementing _____; and evaluating performance and implementing _____. Question 27 options: 1) business cycle plan :: strategic sales 2) strategy/an operational plan :: corrective actions 3) strategy/ operational plan :: pre-packaged Chapter 13 plan 4) equity plan :: debt plan

strategy/an operational plan :: corrective actions

Major structural and operating characteristics of the agricultural production sector include all of the following except: Question 22 options: 1) strong overall liquidity and cash flow despite low asset liquidity 2) a capital-intensive industry dominated by farm real estate with sizable capital gains and occasional losses in farm asset values 3) low asset liquidity and increasing debt loads over time 4) relatively small business sizes with volatile farm income,

strong overall liquidity and cash flow despite low asset liquidity

The analysis of operating loans is similar to term loans, and the repayment capacity for operating loans _____ business performance over the current production period. Question 147 options: 1) is strongly inverse to 2) is randomly related to 3) is only mildly dependent on 4) strongly depends on

strongly depends on

Liquidity relates to the firm's capacity to generate _____ to meet financial commitments. Question 62 options: 1) 75% of the cash needed 2) sufficient cash without significant loss of value 3) 150% of the cash needed 4) none of the other answers are correct

sufficient cash without significant loss of value

The major institutional sources of loan funds for US agriculture are commercial banks, _____, and life insurance companies. Question 37 options: 1) the National Rural Utilities Coop 2) hedge funds 3) the Farm Credit System 4) the Federal Home Loan System

the Farm Credit System

The financing of current assets involves the consideration of operating inputs, _____, and the types of operating loans. Question 145 options: 1) a maturity structure of debt no more than 75% of the length of the payoff periods for the assets being financed 2) a rolling maturity structure of so the borrower can replace the assets being financed 3) the analysis of operating loans 4) a maturity structure of debt at least 125% the length of the payoff periods for the assets being financed

the analysis of operating loans

Interconnected solvency measures are the debt-to-equity ratio, ______ and the equity-to-asset ratio. Question 57 options: 1) the debt-to-working capital ratio 2) none of the other answers are correct 3) the debt-to-asset ratio 4) the working capital-to-asset ratio

the debt-to-asset ratio

If the operating loan is used only to pay for operating inputs, the loan will be self-liquidating if: (1) _____ and (2) farm sales exceed operating expenses. Question 148 options: 1) the note matures before income from the sale of farm products is received 2) the note does not mature before income from the sale of farm products is received 3) the note matures before income taxes are due, but only for cash-based entities 4) the note matures before income taxes are due, but only for accrual-based entities

the note does not mature before income from the sale of farm products is received

Growth decisions must consider the ____ and its implications for savings versus consumption. Expenditures for family consumption, income tax payments, and other withdrawals of funds can rapidly drain farm income and ____ . Question 132 options: 1) time value of money :: impact realized inflation. 2) growth rates in M1A :: impact realized inflation. 3) growth rates in M1A :: severely constrain growth. 4) time value of money :: severely constrain growth.

time value of money :: severely constrain growth.

The applicability of quantitative versus judgmental risk ratings can differ in terms of simplicity, accuracy, ______ of default probabilities, generally making a combined approach the best solution. Question 87 options: 1) interest rate, collateralization, and estimation 2) timeliness, securitization possibility, and estimation 3) timeliness, customization, and estimation 4) none of the other answers are correct

timeliness, customization, and estimation

Lenders may hold sizable claims on a business and need ______ information about its financial performance. Question 74 options: 1) annual, accurate, and complete 2) none of the other answers are correct 3) timely, accurate, and best efforts 4) timely, accurate, and complete

timely, accurate, and complete

Solvency refers to the capital structure of the business. A firm is solvent if the sale of all assets would generate sufficient cash _____ . Question 64 options: 1) to pay off all loans secured directly by land 2) to pay off all liabilities 3) to pay off all net depreciation balances 4) to pay off all short-term loans and vendor advances

to pay off all liabilities

Other credit risk considerations include the use of single versus multiple years of data, ______ , scoring versus rating models, types of loan, and the roles of loan guarantees, cosigners, and insurance. Question 86 options: 1) trade-off versus screening models 2) all of the other answers are correct 3) medical history 4) geographic proximity to the bank

trade-off versus screening models

The pecking order theory is motivated by two major factors: ____ and ____ . Question 126 options: 1) debt costs :: public information 2) transaction costs :: asymmetric information 3) transaction costs :: public information 4) debt costs :: asymmetric information

transaction costs :: asymmetric information

The primary tools of financial analysis for ag producers include all of the following except: Question 60 options: 1) specific financial performance measures. 2) trend series indexed to major stock markets, 3) common-size financial statements and 4) comparative financial statements,

trend series indexed to major stock markets,

Diversifying among several _____ , and even between farm and nonfarm activities is a _____ approach to risk management in agriculture. Low or negative correlation of returns among enterprises will _____ over time. Question 100 options: 1) types of farm enterprises:: nonsensical :: bankrupt farmers 2) types of farm enterprises:: traditional :: bankrupt farmers 3) types of farm enterprises:: traditional :: stabilize total returns 4) domestic and international stocks:: traditional :: amplify total returns

types of farm enterprises:: traditional :: stabilize total returns

The complexity of the growth model increases when ____ occurs. The variability of growth must include terms for variations in ____ . Question 7 options: 1) unanticipated variation in debt to equity ratios :: time 2) unanticipated variation in interest rates :: returns and interest rates 3) unanticipated variation in interest rates :: time 4) unanticipated variation in debt to equity ratios :: returns and interest rates

unanticipated variation in interest rates :: returns and interest rates

Conditions for growth often exist when the firm has ____ , or savings from disposable income to be invested. Question 128 options: 1) under-utilized resources, less than optimal resource allocation 2) under-utilized resources, excess capacity due to superior resource allocation 3) none of the other answers are correct 4) excess capacity due to superior resource allocation

under-utilized resources, less than optimal resource allocation

Higher financial leverage results in increased financial risks. As leverage increases, the ____ of expected returns to equity increases and ____ provided by ____ reserves is reduced. Question 131 options: 1) variation :: credit :: bank 2) none of the other answers are correct 3) variation :: equity :: shareholder 4) variation :: liquidity :: credit

variation :: liquidity :: credit

The standard deviation of the growth rate is the ____ of the risky assets, adjusted by the withdrawals for taxation and consumption (k). Question 9 options: 1) unweighted sample standard deviation 2) none of the other answers are correct 3) weighted average 4) weighted standard deviation

weighted standard deviation

Credit risk is the possibility the borrower ______ the lender. Question 75 options: 1) will default on a loan, and resulting in a court case for 2) will default on a loan, resulting in a loss to 3) none of the other answers are correct 4) has obtained the loan fraudulently

will default on a loan, resulting in a loss to

Measures of liquidity include _____, _____ and working capital to value of farm production. Question 67 options: 1) long term capital, Sharpe ratio 2) borrowed capital, Sortino ratio 3) working capital, current ratio 4) permanent capital, current ratio

working capital, current ratio