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71 Cards in this Set
 Front
 Back
Deed of Trust

Security agreement for real property


Lender

Beneficiary


# of Days after forclosure to pay past due P&I and late fees to become reinstated

90


Loans greater than 1 year

Term Debt


Another Term for a "Loan Grantor"

Underwriter


NonRevolving Line of Credit

Can borrow up to limit in strict accordance with cash flow budget


Reciporical To Sinking Fund

Future value of annuity


3 business management activities

Production, Marketing, and finance


Total interest over the term of a loan=?

Periodic Loan payment x # periods  total borrowed


Proper Cash Flow Budget

Beginning cash balance
+Cash Inflows =Cash Available Cash Outflows =Excess/deficit +Borrowed LOC principal LOC interest payback LOC principal Payback =Ending Cash Balance 

What comes first in account entries of good form?

List Debits (left side) first


Security agreements

Collateral Forfeited in case of default


Statement that measures company performance

Income Statment


NFIFO

=Gross revenues operating expenses& interest expense


Effective Leverage

Rate of Return on farm equity great than rate of return on farm assets


Current Ratio Ag lending standard

>1.25:1


Profitability measure

Rate of return on farm assets


Payback method is measured in?

Years


When IRR= Discount Rate, what is NPV?

Zero


When Cost of Capital goes down, NPV?

Goes Up


When B/C is negative, and PVin<PVout , NPV=?

Between 0 and 1


Simple rate of return

=Annual net income/ Initial investment made


APR is the same as:

THe internal rate of return (IRR)


Is the principal portion of a loan payment tax deductible?

No


Tax Benefit from Depreciation Expense=

Depreciation expense x (t)tax rate


Shape of the dominating set

Upward sloping to the right


Define Business Risk

A variation in returns


Two methods of asset valuation

Historical Cost, and market value


Market Value

Historical cost of an asset accumulated depreciation


Historical cost

The original cost of an asset, accumulated depreciation is not accounted for


Definition: Finance

ANything to do with the sources and uses of funds


Production

Combining inputs to create an output


Sources of funds

Equity, revenues, sale of capital assets, repayment of debts, withdrawals


Uses of Funds

Operating expense, purchase of capital assets, repayment of debt, withdrawals


Points

Interest paid before loan is funded, 1pt= 1% of original price


Short term loan

Loan<1 year


Intermediate term loan

loan from 110 years


Long term loan

Greater than 10 years


Simple interest formula

I=PRT


Future value of a dollar

FV=(PV)(1+i)^n


Present value of a dollar

PV= FV/(1+i)^n


Present Value of an Annuity

PVA= 1(1+i)^n/ i


Future Value of an Annuity

FVA= (1+i)^n1/ i


Equal payment amortization

= i/1(1+i)^n


Sinking fund

=i/(1+i)^n1


Capital Budgeting

the process of planning expenditures on assets with a productive life of>1yr ie capital assets


Net present Value=

Sum PVinflows Sum PV outflows


Benefit cost ratio

Sum PV inflows/ Sum PV outflows


IRR

discount rate at which SUM PV inflows= SUM PV Outflows


IS deprecition expense accounted for in Capital budgeting?

No


Cost of Capital Formula

Kc= WdKd+ WeKe


Kc

Cost of Capital as a rate


Wd

Debt to asset ratio


Kd

cost of debt (interest expense/ total lia)


We

Equity to asset ratio (total OE/ total assets)


Ke

Cost of equity (rate)


Income tax effects cash how in cap budgeting?

It is seen as a cash outflow


Taxable cash income=

Taxable cash revenues taxable cash expenses


After tax net cash inflow

(taxable cash income)(1t)+ (depreciation expense)(t)


Net cash flow

=Principal+interest+tax benefit


Leasing PV

= Net cash flow x PV factor(1+i^n)


Balance sheet

Assets= Liabilities+ Owners equity (ALOE)


Income statment

Revenues expenses= net income


Owners equity

Balance Owner withdrawals= net income


Statement of cash flows

Cash Flow from operations
+cash flows from investing +cash flows from financing = net cash 

Liquidity Ratios

Current ratio, working capital


Solvency ratios

Debt to equity
Debt to asset Equity to asset 

Profitability Ratios

Asset turnover
Return on farm equity Operating profit margin ratio ROFA 

FFSC Income statement format

Gross Revenue
Operating expenses interest expense = net farm income from farm operations +/ gains or losses on sale of Cap asset =Net farm income +/Misc rev/expenses income tax = net income 

Cash system

Revenues recognized when payments recieved, expenses when paid


Accrual system

Revenues recognized when earned/ expense when incurred
