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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
Non-Revolving 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 1-10 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)^n-1/ i
Equal payment amortization
= i/1-(1+i)^-n
Sinking fund
=i/(1+i)^n-1
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)(1-t)+ (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