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Test your farm finance IQ

Bob Nichols near a roadway on a farm in Navasota, Texas
Join us for a one-day workshop on farm finance, Jan. 22, 2020.

Our 2020 Ag Finance Boot Camp speakers want to see just how well you know the keys to better farm financial management. Take this quiz, then sign up for our one-day workshop, Jan. 22 at the Coralville Marriott Conference Center and Hotel. We’ll cover these topics and more! Just go to for details.

1. Accrual accounting is better than cash basis accounting because:

A. It always shows more net income than cash accounting

B. It shows a more accurate reflection of true net income

C. It is easier to do than cash accounting

D. All of the above

2. Using financial ratios in your farm operation can:

A. Show you where you need improvement

B. Show you your short-term and long-term trend

C. Show you how you compare to your peers

D. All of the above

3. Working Capital in a farm operation:

A. Represents operating liquidity available to your business

B. Represents the money available to meet your obligations

C. Does not apply to a farm

D. A and B

4. Refinancing your short-term debt with long-term debt will:

A. Improve your working capital

B. Reduce your working capital

C. Make your interest rate go down

D. Have no effect on your working capital

5. I want to Rebalance my balance sheet. That means I’m going to

A. Organize it so the most liquid assets are listed first

B. Organize it so the long term assets are listed first

C. Take cash/equity out of one category of assets on the balance sheet and place it in another category

D. Lump all intermediate and long term assets into one category and leaving current assets by itself

6. How should you measure the equity in your operation to get the truest picture of your equity position?

A. Look at overall net worth plus outstanding loans

B. Look at equity across asset categories separately - Current, intermediate, and long term 

C. Look at real estate plus intermediate and short term debt

D. None of the above

7. Would it be possible for your equity in long term assets total to exceed your total net worth?

A. Yes, because of negative equity in other categories

B. No, because overall net worth counts all categories

C. It depends on if you have over 50% of your assets tied up in land

8. What is a cleanup provision as it relates to farm operating loans?

A. The same thing as the maturity date

B. Like a grace period, it’s the amount of time you get after maturity to pay the loan off

C. A built in extra 30 days to pay off the loan that the banker doesn’t tell you about

D. A specified amount of time (for ex: 30 days) that your operating loan has to be paid down for before it can be renewed

9. A company’s breakeven point is best described as the point at which:

A. Total assets equal total liabilities

B. Total revenue equals total net income

C. Total expenses are covered by total cash

 D. Total revenue equals total expenses

10. Operating leverage is defined as:

A. The degree to which fixed expenses are used to magnify operating profits

B. Total assets divided by total liabilities

C. The degree to which assets grow relative to revenue

D. Both a & c

11. Total Asset Turnover is an asset utilization measure.  It is measured as:

A. Total assets minus total liabilities

B. Total revenue divided by total assets

C. Total assets divided net profit

D. None of the above

12. Which of the following is a sustainable, recurring source of cash flow for a business?

A. Equity contributions

B. Debt

C. Operating profit

D. All are sustainable and recurring

How did you do?

Answers: 1-B, 2-D, 3-D, 4-A, 5-C, 6-B, 7-A, 8-D, 9-D, 10-A, 11-B, 12-C

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