Farm Management test 2
the current ratio is a measure of a farm firm's:
ability to pay short-term credit obligations
low profitability can be caused by
all of the above can cause low profitability
give an example of the analysis measures for economic efficiency
asset turnover ratio
give an example of the analysis measures for liquidity
current ratio
A ranch that just replaced a large number of fences and corrals would most likely see which of the following ratios increase?
depreciation expense ratio
two similar farms could have the same return to management but different net farm income due to:
difference in amount of unpaid labor and equity capital contributed
Which of the following farm business analysis measures is not a measure of efficiency (either physical or economic)?
dollars received per ton of hay sold
Cash grain farms can usually operate safely with a lower current ratio than dairy farms.
false
Gross revenue per person-year is a measure of physical efficiency.
false
If the percent return on assets (ROA) is less than the percent return on equity (ROE), borrowed money is earning a profit on average.
false
Most of the information needed for analyzing profitability comes from the balance sheet.
false
The return on assets (ROA) is a good measure of the marginal return that can be expected from investing more capital in the business.
false
Working capital is a good measure of the solvency of the farm business.
false
When the value of livestock production per $100 feed fed is greater than 100 it means that:
feed costs were less than gross revenue adjusted for inventory changes and livestock purchases
give an example of the analysis measures for physical efficiency
feeder calves produced (lbs per calf)
give an example of the analysis measures for farm size
gross revenue
which of the following is a measure of economic efficiency?
gross revenue per year of labor utilized
a trend analysis for a farm business could be performed using what kind of data for comparison?
historical data from the same farm for the past five years
A farm's asset turnover ratio measures:
how much gross revenue is generated for each dollar invested in farm assets
an advantage of using the value of working capital instead of a cash flow budget to analyze a farm's liquidity
it is simpler to calculate
A farm's physical efficiency can be measured by:
pounds of feed required to produce a pound of gain in livestock
Economic efficiency is a combination of all of the following except:
solvency
the degree to which a farms assets adequately secure its debts is referred to as:
solvency
in general terms, efficiency refers to:
the volume or value of production generated per unit of resource utilized in the farm business
A farm business that has good solvency but poor liquidity may be spending too much on nonfarm purchases.
true
A farm business would be considered "profitable" any year net farm income is positive.
true
If a farm has zero liabilities and pays no interest, the ROA and ROE will be the same.
true
If the average borrowing rate for funds is 5% and the rate of return on equity is 6%, then the rate of return on capital will be less than 6%.
true
In general terms, "efficiency" determines whether farms and ranches with the most resources also generate the most production.
true
Increasing livestock production by building up inventories of raised breeding stock and feed can cause temporary liquidity problems.
true
Physical efficiency measures do not take into account the prices paid to acquire resources.
true
Pounds of feed fed per pound of gain is a measure of physical efficiency.
true
The current ratio measures liquidity or the ability of the business to meet cash obligations as they come due without disrupting the business.
true
The debt/asset ratio and the debt/equity ratio both measure the overall solvency of the farm business
true
The lower the debt-to-asset ratio, the greater the solvency of a business.
true
Which of the following ratios does not analyze the solvency of the farm business?
turnover ratio
