Exam #2 Flashcards

1
Q

The purpose of a _____________ is to measure the financial position of a business at any time through solvency and liquidity.

A

Balance Sheet

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2
Q

__________ measures the liabilities of a business relative to the amount of owner equity invested.

A

Solvency

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3
Q

Provides indication that all debts can be paid if the business sold.

A

Solvency

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4
Q

If the business is _____________, it is bankrupt.

A

Insolvent

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5
Q

_____________ measures the ability to meet financial obligations when they come due without disrupting the flow of business.

A

Liquidity

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6
Q

______ measures the ability to generate cash in the amounts at the time it is needed.

A

Liquidity

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7
Q

Liquidity/Solvency is a short-run concept.

A

Liquidity

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8
Q

Liquidity/Solvency is a long-term concept.

A

Solvency

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9
Q

Can you be liquid, but not solvent?

A

Yes

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10
Q

Can you be solvent but not liquid?

A

Yes and no.

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11
Q

________ can be sold to generate cash and used to produce other goods that in turn can be sold for cash in the future.

A

Assets

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12
Q

Assets that can be used up, sold, or converted to cash in the next year as a normal part of business activities.

A

Current Assets

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13
Q

The most important liquid of all assets

A

Current Assets

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14
Q

___________ assets is where revenue is made

A

Current Assets

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15
Q

___________ assets are light outputs.

A

Current.

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16
Q

___________ assets are inputs.

A

Noncurrent

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17
Q

___________ assets are any assets that are not classified as a current asset.

A

Noncurrent.

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18
Q

Piglets, hay, feed, calves, nails, are __________ assets.

A

Current

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19
Q

Land, home, and breeding stock are ____________ assets.

A

Noncurrent

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20
Q

An obligation/debt owed to someone else is a _____________.

A

Liability

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21
Q

An outsider’s claim against 1 or more of the business’s assets is a ____________.

A

Liability

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22
Q

Financial obligations that will become due and payable within 1 year from the date of the balance sheet is a ___________ liability

A

Current

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23
Q

________________ is a short-term issue.

A

Current liability

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24
Q

All obligations that do not have to be paid in full within the next year are __________ liabilities.

A

Noncurrent

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25
Q

Liability that is typically a debt due in 1-10 years is an ____________ liability.

A

Intermediate

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26
Q

A debt due in 10+ years is a ________________ liability

A

Long-term.

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27
Q

_____________ represents the amount of money left for the owner of the business should that asset be sold and all liabilities paid as of the date of the balance sheet.

A

Owner Equity

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28
Q

_____________ = Net Worth

A

Owner Equity

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29
Q

Owner Equity is also known as: ___________

A

net worth

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30
Q

T/F - Owner equity can change due to profit or loss.

A

True

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31
Q

T/F - Owner equity can be changed using assets to produce crops and livestock?

A

True

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32
Q

Changes in the composition of assets and liabilities always cause a change in owner equity

A

False

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33
Q

_________ sets inventory and is valued to current market price.

A

Market Value

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34
Q

Valued at original cost.

A

Cost

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35
Q

__________ is valued at both cost and market value.

A

Lower of Cost or Market

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36
Q

Purpose of a ______________ is to obtain measures of the financial position and strengths of the business: liquidty, solvency, and other financial performance.

A

Balance Sheet

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37
Q

T/F - Liquidity is usually measured over the next accounting periods.

A

True

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38
Q

T/F - Liquidity concentrates on noncurrent assets and noncurrent liabilities.

A

False

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39
Q

T/F - Liquidity concentrates on current assets and current liabilities.

A

True

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40
Q

________________ = Current Asset Value / Current Liability Value

A

Current Ratio

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41
Q

T/F - With Current Ratio, a value less than one is ideal.

A

False

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42
Q

T/F - In Current Ratio, a value greater than 1 is ideal.

A

True

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43
Q

__________ measures liquidity using a dollar ($) amount.

A

Working Capital

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44
Q

___________ = Current Assets - Current Liabilities

A

Working Capital

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45
Q

Working Capital = ____________ - __________

A

Current Assets - Current Liabilities

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46
Q

T/F - When analyzing solvency, we measure the relative relations among total assets, total liabilities, and equity, which include non-current terms.

A

True

47
Q

T/F - When assets are less than liabilities, the business is solvent.

A

False

48
Q

T/F - When assets are greater than liabilities, the business is solvent.

A

True

49
Q

____________ measures what part of total assets is owed to lendors.

A

Debt/Asset Ratio

50
Q

__________ = Total Liabilities / Total Assets

A

Debt/Asset Ratio

51
Q

Debt/Asset Ratio = ____________ / __________

A

Total Liabilities / Total Assets

52
Q

__________ measures what part of total assets is financed by the Owners Equity Capital

A

Equity/Asset Ratio

53
Q

T/F - Equity/Asset Ratio measures what part of total assets is financed by the Owners Equity Capital.

A

True

54
Q

Equity/Asset Ratio = ___________ / ___________

A

Total Equity / Total Assets

55
Q

________________ = Total Equity / Total Assets

A

Equity/Asset Ratio

56
Q

Debt/Equity Ratio = __________ / __________

A

Total Liabilities / Owner Equity

57
Q

___________ = Total Liabilities / Owner Equity

A

Debt/Equity Ratio

58
Q

AKA: the leverage ratio

A

Debt/Equity Ratio

59
Q

__________ compares the proportion of financing provided by lenders with that provided by the owner.

A

Debt/Equity Ratio

60
Q

T/F - Not all cash receipts are revenues.

A

True

61
Q

T/F - Gift/Inheritance is a revenue

A

False

62
Q

T/F - All cash receipts are revenues.

A

False

63
Q

T/F - Gift/Inheritance is NOT a revenue.

A

True

64
Q

T/F - A loan from the bank is NOT a revenue.

A

True

65
Q

T/F - A loan from the bank is a revenue.

A

False

66
Q

T/F - Non-farm income is not a revenue.

A

True

67
Q

T/F - Non-farm income is a revenue.

A

False

68
Q

T/F - Expenses can be cash or noncash.

A

True

69
Q

T/F - Expenses can only be cash.

A

False

70
Q

Depreciation, accounts payable, accrued interest, and other accrued expenses are _________ expenses.

A

Noncash

71
Q

T/F - Not every expenditure of cash is a business expense

A

True

72
Q

T/F - Every expenditure of cash is a business expense.

A

False

73
Q

T/F - Clothes, gifts, etc., cannot be listed as an expense.

A

True

74
Q

T/F - Expenses on an income statement consist of only business expense items required to produce agricultural commodities and services.

A

True

75
Q

The “O” in NFIO stands for ___________

A

Operations

76
Q

_________ is concerned with the size of the profit relative to the size of the business, or the value of resources used to produce the profit.

A

Profitability

77
Q

T/F - A business can show a profit but have poor profitability rating if this profit is small relative to the size of the business.

A

True

78
Q

_________ is the amount by which revenue exceeds expenses plus any gain or loss on the sale of capital assets.

A

Net Farm Income

79
Q

T/F - NFIO and NFI can be the same.

A

True

80
Q

T/F - NFIO and NFI can NEVER be the same.

A

False

81
Q

Why can NFIO and NFI sometimes be the same?

A

Because we do not sell/make/lose money on the sale of capital assets.

82
Q

T/F - Net Farm Income is a true measure of profitability

A

False

83
Q

T/F - Net Farm Income is NOT a true measure of profitability

A

True

84
Q

____________ = Revenue - Expenses = NFIO +/- Gain/Loss = NFI

A

Net Farm Income

85
Q

T/F - On a Return of Assets formula, you want a high %.

A

True

86
Q

T/F - On a Return on Assets, you want a low %.

A

False

87
Q

__________ = Return of Assets / Average Farm Asset Value X 100%

A

Return on Assets

88
Q

T/F - Balance Sheet is a period in time.

A

False

89
Q

T/F - Balance sheet is a point in time.

A

True

90
Q

T/F - Income Statement is a period in time.

A

True

91
Q

T/F - Income Statement is a point in time.

A

False

92
Q

_____________ is the return on the owner’s share of the capital invested.

A

Rate of Return on Equity

93
Q

___________ = Return of Equity / Average Equity X 100%

A

Rate of Return on Equity

94
Q

T/F - On Operating Profit Margin Ratio (OPMR), a higher value means more profit per dollar of revenue.

A

True

95
Q

_________ = Operating Profit / Total Revenue X 100%

A

Operating Profit Margin Ratio

96
Q

Operating Profit Margin Ratio = _____________ / ___________ X 100

A

Operating Profit / Total Revenue

97
Q

Rate of Return on Equity = ______________ / _____________ X 100

A

Return of Equity / Average Equity

98
Q

Return on Assets = __________________ / ___________ X 100

A

Return of Assets / Average Farm Asset Value

99
Q

An ______________ is an estimate of the combination of inputs that can achieve the optimal level of output per unit of enterprise.

A

Enterprise Budgets

100
Q

___________ is an individual crop or type of livestock.

A

Enterprise

101
Q

A related portion of a business that can be treated as a unit

A

Enterprise

102
Q

T/F - The primary purpose of a enterprise budget is to estimate the projected cost, returns, and profit for the enterprise.

A

True

103
Q

T/F - Operating Profit Margin Ratio can be found at the local county extension agents to represent “typical” situations.

A

False

104
Q

T/F - Enterprise budgets can be found at the local county extension agent’s office to represent “typical” situations.

A

True

105
Q

T/F - All expenses must be estimated on a per-unit charge in an enterprise budget.

A

True.

106
Q

________ include only costs that will be incurred if the enterprise is actually done.

A

Operating Expenses

107
Q

T/F - Ownership expenses are variable expenses.

A

False

108
Q

T/F - Ownership expenses are fixed expenses.

A

True

109
Q

T/F - Operating expenses are fixed expenses.

A

False

110
Q

T/F - Operating expenses are variable expenses.

A

True

111
Q

T/F - Fixed assets shared with other enterprises must be pro-rated for each enterprise they support.

A

True

112
Q

__________ are costs that would exist whether or not the enterprise is operated.

A

Ownership Expense.

113
Q

Two main analyses on an enterprise budget?

A

Cost of Production Analysis and Breakeven Analysis