FFA Farm Business Management Practice Test #1

at 200 units of output, total costs is $36,000 and total variable cost is $20,000. What does the total fixed cost equal at 200 units?

$16,000

the current ratio is a measure of a farm firms _____

Ability to pay short-term credit obligations.

which of the following would appear on an income statement but NOT a cash flow budget?

Gain or loss on the sale of a capital asset, inventory changes, and depreciation

average fixed cost ___

Is usually greater at lower levels of output than at higher levels and only exists in the short run.

which of the following is an example of a non current liability

Loan on farm machinery

on a partial budget, which analyzes switching 120 acres from growing wheat to growing barley, which of the following costs would NOT be included on the budget?

Property tax on the land

Five months ago Wilson opened up a health club. Which of the following is an implicit cost related to the health club?

Wilson previously worked as an accountant, earning $3,000 a month.

The statement "To achieve an average feed conversion rate of 2.75 points per feed pound of gain for my market hogs by 2020" is....

a goal.

depreciation is a cost associated with which of the following assets?

a machinery storage shed.

a major advantage of accrual accounting over cash accounting is ____

a more accurate estimate of annual profit

if an increase in income is results in an increase in the demand for chicken,then chicken is _____

a normal good.

a limited liability company combines the legal aspects of ____

a partnership and a corporation.

an increase in the number of buyers in an area will result in a....

a rightward shift of the demand curve

At the end of the year a farmer has an unpaid bill at the local machinery repair shop. It would be shown in an accrual accounting system as a(n) ____

account payable.

which of the following are the profit decreasing charges on a partial budget?

additional costs and reduced revenue.

Some years ago, chemists at 3m corporation were trying to create a super-strong glue. somehow they got their molecules twisted and came up with one of the weakest glues ever made. Rather than pouring it down the drain, they tried coating some paper with it. Voila! The post-it note was born. In this case, 3M was acting as....

an entrepreneur.

If Max's demand for hot dogs falls as his income rises, then for Max hot dogs are____

an inferior good

Of the following, which is the most liquid asset?

balance in checking account

which financial statement covers only a single point in time rather than a period time?

balance sheet

which of the following is an example of a tactical decision?

balancing a livestock ration

the proper term for the value found by subtracting accumulated depreciation from the assets original cost is ____

book value

a fixed input is an input whose quantity ____

cannot be changed as output changes in the short run

which of the following items on a balance sheet would NOT be considered when making accrual adjustments to net income?

change in market value of land.

An organized list of all accounts used by an accounting system is called ___

chart of accounts

a cash flow budget can be used to monitor the farm business by ....

comparing actual cash inflows and outflows to the budgeted monthly cash flows

the total deprecation over an assets useful life is equal to ___

cost minus savage value

suppose that one fixed and one variable input are used to produce good X. as the marginal physical product of the variable input increases, the marginal cost ____

decreases.

A projected negative cash balance at the end of the year can be made positive by....

delaying proposed purchase of capital assets, carrying over less inventory of stored grain to the following year, and lengthening repayment periods on term loans.

a cash flow budget does not need to contain

depreciation

which of the following is an example of a strategic decision?

determining what type of business/legal organization to use

If a firm earns normal profit, then it has generated revenues_____

equal in o the sum of implicit and explicit costs.

The last step in constructing a cash flow budget should be....

estimating how much new current debt will be needed and can be repaid each month

Costs that do not change with output are called ___ costs.

fixed

Which of the following is NOT one of the categories of resources?

government

if a business has working capital greater than $0, its current ratio will be ___

greater than one

A cost of resources used in production for which no actual monetary payment is made is a(n) __________ cost.

implicit

a prepaid expense is one where payment is made....

in an accounting period prior to the one in which the item will be used to produce income.

the best description of a business which has increased its debt/asset ratio is one which has _____

increased its debt relative to total assets

If the debt/asset ratio is increasing, then the debt/equity ratio will be___

increasing

which of the following would NOT appear on a cash flow budget?

inventory change

which of the following best describes a balance sheet?

it shows assets and liabilities at a point in time

"doubling the number of acres farmer in 10 years", is an example of a ________

long run goal.

"What managers do" is best described by which of the following?

make decisions.

To be depreciable, an asset must have a useful life of___

more than one year

which type of financial statements would be most useful for keeping record of expenses?

net income statement.

another term which has the same meaning as owners equity is ____

net worth

the values shown on a partial budget are ....

only changes in revenues and expenses

estate planning is most concerned with passing on the ____ of the farm to the next generation.

ownership.

one major reason for the law of demand is that ____

people substitute relatively lower-priced goods for relatively higher-priced goods.

when something is purchased and paid for in a year before it will be used to produce income it is called a ____

prepaid expense.

which of the following assets would have the same value using either a cost or market based valuation?

prepaid expenses

which of the following is NOT included as an expense on the net farm income statement?

principal payments made on loans

a partial budget is designed to analyze the effect of a proposed management change on .....

profit

A projected negative annual cash flow indicates

projected cash inflows are less than projected cash outflows

which of the following are the profit increasing changes on a partial budget ?

reduced costs and additional revenue

a cash flow analysis is an investment in a new capital asset should include projections for ___

several years.

the most common form of farm business organization is the _____

sole proprietorship.

the degree to which a farms assets adequately cover or exceed its liabilities is referred to as ____

solvency

the degree to which a farms assets adequately secure its debts is referred to as ____

solvency

a limited partnership is one in which ____

some partners do not participate in management, and have limited liability

An unrecoverable cost that should be disregarded in any current or future decision is also called a(n) __________ cost.

sunk

when preparing a cash flow budget it is important to ____

take into account the expected things of cash inflows and outflows.

In a cooperative, shareholders have voting rights

that are equal for all members.

A partial budget would be the most useful type of budget for estimating ____

the change in profit from installing an irrigation system in one field

A partial budget is an appropriate tool for analyzing...

the expansion of an existing enterprise

If a partial budget shows some fixed or ownership costs under Reduced Costs, it means

the proposed alternative would allow sale of a capital asset that will no longer be needed

Statement of Owner's Equity shows____

the sources and amounts of changes in owner equity.

economic profit is the difference between total revenue and_____

the sum of explicit and implicit costs.

"Entrepreneurship" is________.

the talent for organizing the use of land, labor and capital, among other things.

which of the following is true about what the relationship between price and quantity?

there is usually a direct relationship.

According to the cash accounting method, expenses are recorded____

when they are paid.

which of the following would not be recorded when using a single-entry, cash, accounting system.

Charging $2,000 worth of chemicals at the farm supply store, billing a neighbor $850 for baling hay, and recognizing that $3,476.34 of interest has accrued since the last interest payment.

When economists speak of scarcity, they are referring to the _______.

Condition in which peoples wants outstrip the limited resources available to satisfy those wants.