Midterm Flashcards
Name sources of capital
Owner Equity
Outside Equity
Credit
What are the three types of credit accounts
Accounts Payable
Loans
Line of credit
What are loan charecteristics
Length of repayment
Repayment structure
Purpose/use
Types of security
What are two methods of asset valuation for balance seets
Cost basis & Market Basis
What type of balance sheet would a bank or lender prefer to see
Market basis
What are sources of cash inflows
Operating receipts
New loans or borrowed mone
sale of capital assets
Non farm income
Beginning cash balance
What are sources of cash outflows
Operating Expenses
Loan Principal payments
Loan interest payments
Purchase of capital assets
Non farm expenses/family withdrawl
Will every capital asset have a depreciation schedule
& Why ?
No. Some capital assets do not depreciate like land
Will every capital asset have a loan schedule
No. If you purchase the capital asset in its entirety there is no need for a loan schedule
Name the depreciated methods
straight line
Declining balance
10% rule
Half year convention
What are the forms of business organization that are considered joint ventures
Operating agreement
Partnership
Corporation
Limited Liability Company
What are the stages of the business lifecycle
Entry
Growth
Consolidation
Exit
the 2 balance sheet relationships for solvency
Net Worth = total assets - total liabilities
Total Assets = Net worth + total liabilities
Categorize the balance sheet items (assets/liabilities, current/noncurrent)
Accounts payable Investments in growing crops Real estate loans
Accounts payable = Current liabilities
Investment in growing crops = current asset
(why?)
Real estate loan =current and noncurrent liability
Which financial statement is most associated with an interval of time: balance sheet or income statement?
Income Statement
Define and interpret two measures of solvency
Net Worth= Total Assets-Total Liabilities
Debt to asset ratio: Total Liabilities/Total Assets
Define and interpret two measures of liquidity
Working capital: current assets-current liabilities
Current Ratio: Current assets/Current liabilities
What are two methods of constructing income statements ?
Cash basis and Accrual Basis
Which type best reflects the true management performance of the business during a calendar year?
Cash basis
What is the income statement relationship between revenues, expenses, net farm income (NFI) and net farm income from operations (NFIFO)?
NFIFO (Net Farm Income from Operations):
NFIFO = Revenues - Expenses
NFI (Net Farm Income):
NFI = Revenues - Expenses+/- Gain or Loss from Sale of Capital Assets
Name one type of cash inflow that is not counted as revenue on an income statement?
New Loans or other borrowed money
Sale of Capital Assets
Non-Business Income/Personal Investment
Name two types of cash outflows that are not counted as expenses on an income statement?
Purchase of New capital Assets
Payment of loan principal
Personal/Family Withdrawls
Name a non‐cash expense that is included on the income statement?
Depreciation
