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20 Cards in this Set
- Front
- Back
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Two Ways To Quantify Risk and Return |
Mean
Standard Deviation |
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What Is The Fundamental Accounting Identity |
A - L = E
(A - D = E) |
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Balance Sheet |
Systemic listing of the assets and liabilities of a business (stock measure)
Snapshot on a particular date |
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Income Statement |
Details of income and expenditures over time (flow measure) |
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4 Parts of Income Statement: |
Revenues Operating Cash Expenses Noncash expenses Interest expense |
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What does a Statement of Cash Flows Provide |
Shows ability of a business to generate cash
Combines info from the balance sheet and income statement |
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Ratios help measure a farm's... |
Profitability
Liquidity
Solvency
Repayment Capacity
Financial Efficiency |
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Return of Farm Assets (AOFA) = (ROA) |
Profitability Ratio
Measures return on assets net of financing considerations
(Net Farm Income + Farm interest expense - Owner withdrawals) / average farm total assets = R/A |
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R |
NFIO + Id = LC + OT
NFIO - Net Farm Income from Operations Id - farm interest expense LC - value of operator and unpaid labor OT - other net income on farm income (Sale of breeding stock) |
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Rate of Return on Farm Equity (ROFE) |
Measures rate of return on equity capital
Takes whole firm factors into account, including method of financing (D to E relative of A)
ROFE = Ie/E |
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Ie |
NFIO - LC + OT |
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Difference between ROA and ROE |
ROA gives idea as to how efficient management is at using assets to generate earnings
ROE indicates what return a company is generating on the owner's investment Higher ROE indicates faster growth within the company and little reliance on outside resources |
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Asset Turnover Ratio |
Measure of how efficient farm assets are being used to generate revenue
Gross Revenues / Average total farm assets |
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Operating Profit Margin Ratio |
Measures PROFITABILITY in terms of return per dollar of gross revenue
(NFIO + Farm Interest Expense - Owner withdrawals) / Gross revenues |
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Net Farm Income (NFI) |
measures RETURN to farmer for unpaid labor, management and owner equity
calculated by matching revenues with expenses incurred to create those expenses, plus gain or loss on sale of assets, before taxes |
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Liquidity |
the ability to generate cash to meet short-term obligations |
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What does the current ratio tell you about a farm? |
Current Assets/Current Liabilities
Measures the farm's ability to cover short-term obligations |
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Solvency |
Ability of firm to meet long-term financial obligation |
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Measures of Solvency |
Debt/Asset What proportion of assets owed to creditors
Equity/Asset Assets financed by owners capital
Debt/Equity Relationship between equity capital and borrowed capital |
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Dupont Analysis |
Brakes down ROE and ROA into their components and identify why ratios change and discover sources of change
ROA = OPM*ATR
ROE = (ROA - Id /A) * (A/E) |
