Deck 6: Farm Business Analysis

Question 1

What are the steps in the control function of farm management

Answer 1

Farm Management:
The term farm management refers to organizing the work of a large commercial farm in a manner that profit can be earned. Better farm management can be achieved by considering the economical, technological and climatic changes in mind.
Steps in control function of farm management:
The three steps in the control function of farm management are explained below:
• Farm should establish the standards for comparing the actual results.
• Manager of the farm management should evaluate the actual performance of the business.
• Farm manager should identify those areas whose performance is not as per the standards and take necessary actions to rectify these areas.
Therefore, these three steps are helps to the manager in controlling the various functions of farm management.

Question 2

What types of standards or values can be used to compare and evaluate efficiency and profitability measures for an individual farm
What are the advantages and disadvantages of each

Answer 2

Farm Management:
The term farm management refers to organizing the work of a large commercial farm in a manner that profit can be earned. Better farm management can be achieved by considering the economical, technological and climatic changes in mind.
Standards or values to be utilized to compare and assess the efficiency and profitability measures of a farm:
Records of comparable farms are used to compare and measure the efficiency and profitability for an individual farm. The current prices of the product of the farm and weather conditions are helps in accurately find the performance of the individual farm. It is very difficult to know about the specific type, size and location of the firm from the above mentioned source of data.
Advantages and disadvantage of trend analysis:
Table (1)
Advantages and disadvantage of budgets:
Table (2)

Question 3

What are the differences between "gross revenue" and "value of farm production"
Between "net farm income" and "return to management"

Answer 3

Farm Management:
The term farm management refers to organizing the work of a large commercial farm in a manner that profit can be earned. Better farm management can be achieved by considering the economical, technological and climatic changes in mind.
Differences between gross revenue and value of farm production:
The difference is shown in the table below:
Table (1)
Differences between net farm income and return on management:
Table (2)

Question 4

Use the following data to calculate the profitability and efficiency measures listed below:
a
Rate of return on assets
______%
b
Rate of return on equity
______%
c
Asset turnover ratio
______
d
Return to management $______
e
Net farm income from operations ratio
______

Question 5

What three general factors determine economic efficiency

Question 6

Tell whether each of the following business analysis measures relates to volume of business, profitability, economic efficiency, or physical efficiency.
a
Pounds of cotton harvested per acre
b
Return to management
c
Livestock return per $100 of feed fed
d
Gross revenue
e
Total farm assets
f
Asset turnover ratio

Question 7

Would a crop farm that cash rents 1,200 crop acres and owns 240 acres be more likely to have a better than average asset turnover ratio or operating expense ratio
Why

Question 8

Explain the difference between solvency and liquidity. List three tests that can be used to diagnose liquidity problems.