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26 Cards in this Set
- Front
- Back
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What is a bank? |
1. Operates as a business and try’s to make a profit |
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What is a bank? |
2. Are “custodians” not owners of money |
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What is a bank? |
3. All banks are corporately owned by different individuals. |
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What is a bank? |
4. Pay taxes as a business |
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What is a bank? |
5. Characterized by Fed. Govt |
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What is a bank? |
Regular credit exams paid by banks |
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Community Bank- |
Less than $100 million in deposits |
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Functions of banks: |
1. Depository 2. Payments *commercial banks hold approx. 30% of all public & private debt. |
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Organization of banks: |
1. Unit banks a. Each banks completely independent b. Single office or place of business c. Single board of directors |
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Organization of banks: |
2. Branch banks a. Conducting operations at two or more places but controlled by a single office. b. Branches subject to same regulations as head office c. Only one board of directors d. Lending limit for branch same as for total bank. |
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What is an information System? |
1. In the case of a financial management information system it consists: a. Gathering financial data b. Converting data into information that is useful to farm lenders & farm operators c. Used in management of the financial aspects of the business |
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The foundation of a farm financial management system is: |
The record system |
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The three key elements of a financial management system: |
1. Net worth statement (balance sheet) 2. Income statement 3. Cash flow statement |
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Reasons for financial records: |
1. Obtaining credit 2. Measure financial success and progress 3. Provides realistic cost & return estimates 4. tax reporting and tax planning 5. Factual basis for comparisons with past years, past goals or other farms 6. Helps minimize wrong decisions |
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Levels of financial record keeping: |
1. Simple systems (not acceptable) a. Barn door b. Shoebox 2. Expanded systems a. farm record book b. Computerized journal systems 3. Supervised systems a. Farm and record management associations |
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Components of a financial record system: |
1. Cash transaction record (receipts & expenses) 2. Inventories 3. Depreciation schedules 4. Profit and loss statement (income statement) 5. Production records 6. Cash flow statement 7. Financial statement (net worth) 8. Accounts payable & receivable a. Payables include: 1. Outstanding checks 2.taxes unpaid 3. Rent & interest due 4. Business loans & accounts owed b. Receivables include: 1. Checking & savings account 2.sale-able stocks & bonds 3. Accounts owed to the business |
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Valuation of assets is important for: |
a. Financial statements b. Tax reporting c. Credit |
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Methods of valuing assets: |
1. Cost 2. Market price 3. Cost or market 4. Unit livestock method 5. Cost less accumulated depreciation (book value) 6. Cost plus appreciation 7. Salvage value 8. Appraisal |
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Current assets: |
*one year or less * can be converted to cash very quickly *ex: grain inventories |
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Intermediate assets: |
*one to ten years *productive assets which are normally not held for resale, but are owned in order to produce other commodities for sale *also called working assets *ex: breeding livestock |
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Long term assets: |
*10 years or longer *require a significant amount of time to be sold *ex: farm land |
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Current liabilities |
*anything due in the next year *due and payable on demand *ex: rent, taxes, interest |
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Intermediate liabilities |
*one to ten years *equipment purchases |
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Long term liabilities |
*ten years or longer *ex: notes on land |
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Assets - Liabilities = |
Net worth |
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Two types of net worth statements: |
1.Business 2. Consolidated-business and personal (Lenders prefer consolidated) |
