![Page 1: Check Your Work Farm Business Planning – Lesson 4](https://reader035.vdocuments.us/reader035/viewer/2022062421/56649e105503460f94afbb5f/html5/thumbnails/1.jpg)
Check Your Work
Farm Business Planning – Lesson 4
![Page 2: Check Your Work Farm Business Planning – Lesson 4](https://reader035.vdocuments.us/reader035/viewer/2022062421/56649e105503460f94afbb5f/html5/thumbnails/2.jpg)
A Project Funded by:USDA BFRDP
Grant #10506276Development Partners Include:
Mississippi State University
National Association of Agricultural Educators
Oklahoma State University• Agricultural Economics Department• Oklahoma Cooperative Extension
Service
![Page 3: Check Your Work Farm Business Planning – Lesson 4](https://reader035.vdocuments.us/reader035/viewer/2022062421/56649e105503460f94afbb5f/html5/thumbnails/3.jpg)
The following slides provide the answers for the practice problems for Lesson 4. Activity 1 – Practice What
You Learned.
![Page 4: Check Your Work Farm Business Planning – Lesson 4](https://reader035.vdocuments.us/reader035/viewer/2022062421/56649e105503460f94afbb5f/html5/thumbnails/4.jpg)
Enterprise Budgets and Analysis
1. The cost of producing soybeans is $280 per acre, and soybeans yield 37 bushels per acre.
•Breakeven Price=
•Breakeven Yield=
![Page 5: Check Your Work Farm Business Planning – Lesson 4](https://reader035.vdocuments.us/reader035/viewer/2022062421/56649e105503460f94afbb5f/html5/thumbnails/5.jpg)
Enterprise Budgets and Analysis2. Using this information, estimate the
operating interest that would appear on the farmer’s enterprise budget if the note carries:
•Operating Interest=
•Operating Interest=
![Page 6: Check Your Work Farm Business Planning – Lesson 4](https://reader035.vdocuments.us/reader035/viewer/2022062421/56649e105503460f94afbb5f/html5/thumbnails/6.jpg)
Annual Cash Flow Budget FormSources of cash
Beginning Cash Balance $22,000
Crop Sales -
Livestock Sales $300,000
Sale of Depreciable Assets -
Sale of Land -
Proceeds from Planned Borrowing $102,500
Other Sources of Cash (e.g., contributed capital)
-
Total Sources of Cash $424,500
Uses of Cash
Cash Expenses (excluding interest paid) $102,500
Breeding Stock Purchases -
Purchase of Other Depreciable Assets -
Purchases of Land -
Principal Payments $15,500
Interest Payments on Long-Term Debt $19,800
Operating Note Repayment $102,500
Interest on Operating Note $3,844
Other Uses of Cash -
Total Uses of Cash $244,144
Net Cash Surplus or Deficit $180,356
![Page 7: Check Your Work Farm Business Planning – Lesson 4](https://reader035.vdocuments.us/reader035/viewer/2022062421/56649e105503460f94afbb5f/html5/thumbnails/7.jpg)
Balance Sheets1. Find the following ratios:
• (D/A)=
• (D/E)=
• (E/A)=
• Working Capital = 128,000 – 33,500 = 94.500
• Current Ratio =
![Page 8: Check Your Work Farm Business Planning – Lesson 4](https://reader035.vdocuments.us/reader035/viewer/2022062421/56649e105503460f94afbb5f/html5/thumbnails/8.jpg)
Balance Sheets
Is the operation solvent? Is it liquid? Explain.
•The operation is projected to be both solvent and liquid. Current assets exceed current liabilities by over 380% proving liquidity. The D/A and D/E ratios are low while the E/A ratio is high, proving solvency.
![Page 9: Check Your Work Farm Business Planning – Lesson 4](https://reader035.vdocuments.us/reader035/viewer/2022062421/56649e105503460f94afbb5f/html5/thumbnails/9.jpg)
Balance SheetsCurrent assets Current liabilities
Cash $43,000 Current Portion of Work Truck Note $7,150
Cash Invested in Building $85,000 Operating Interest
Payable
Current Portion of Land Debt $22,000
Interest Payable $4,350
Total current assets $128,000 Total current liabilities $33,500
Non-current assets Non-current liabilities
Land $260,000 Long-Term portion of Land Debt $168,000
Work Truck $51,000 Long-Term portion of Work Truck Note $16,000
Machinery and Equipment $350,000
Total non-current liabilities $184,000
Total non-current assets $661,000 Total liabilities $217,500
Total assets $789,000 Owner’s equity $571,500
Total liabilities + Owner’s equity $789,000
![Page 10: Check Your Work Farm Business Planning – Lesson 4](https://reader035.vdocuments.us/reader035/viewer/2022062421/56649e105503460f94afbb5f/html5/thumbnails/10.jpg)
Find the missing variables of the balance sheet by using the following information
A. $12,600 Total CL – (Current Portion of Long Term Debt + Interest Payable)
B. $71,300 Working Capital + Total Current Liabilities C. $33,800 Total Current Assets – ( Accounts Receivable + Cash invested)
D. $212,300 Total Current Liabilities + Total Non-current Liabilities E. $786,296 Total Liabilities/Debt-to-Asset Ratio F. $714,996 Total Assets – Total Current Assets G. $79,996 Total Non-Current Assets – Machinery – Land H. $573,996 Total Assets – Total Liabilities
![Page 11: Check Your Work Farm Business Planning – Lesson 4](https://reader035.vdocuments.us/reader035/viewer/2022062421/56649e105503460f94afbb5f/html5/thumbnails/11.jpg)
Determine the value of the truck, a non-current asset (NCA) and the amount of current liability (CL) and non-current liability (NCL) that will appear on the balance sheet:
NCA CL NCL
a. at end of year 2 $38,700 $21,545 $199,502
b. at end of year 3 $31,800 $23,053 $176,448
c. at end of year 4 $24,900 $24,667 $151,782
![Page 12: Check Your Work Farm Business Planning – Lesson 4](https://reader035.vdocuments.us/reader035/viewer/2022062421/56649e105503460f94afbb5f/html5/thumbnails/12.jpg)
Special Thanks to:
•USDA BFRDP Grant Program
•Oklahoma State University▫Eric A. DeVuyst, Department of Agricultural
Economics
•National Association of Agricultural Educators