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71 Cards in this Set
- Front
- Back
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Deed of Trust
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Security agreement for real property
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Lender
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Beneficiary
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# of Days after forclosure to pay past due P&I and late fees to become reinstated
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90
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Loans greater than 1 year
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Term Debt
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Another Term for a "Loan Grantor"
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Underwriter
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Non-Revolving Line of Credit
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Can borrow up to limit in strict accordance with cash flow budget
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Reciporical To Sinking Fund
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Future value of annuity
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3 business management activities
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Production, Marketing, and finance
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Total interest over the term of a loan=?
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Periodic Loan payment x # periods - total borrowed
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Proper Cash Flow Budget
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Beginning cash balance
+Cash Inflows =Cash Available -Cash Outflows =Excess/deficit +Borrowed LOC principal -LOC interest payback -LOC principal Payback =Ending Cash Balance |
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What comes first in account entries of good form?
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List Debits (left side) first
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Security agreements
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Collateral Forfeited in case of default
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Statement that measures company performance
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Income Statment
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NFIFO
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=Gross revenues- operating expenses& interest expense
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Effective Leverage
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Rate of Return on farm equity great than rate of return on farm assets
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Current Ratio Ag lending standard
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>1.25:1
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Profitability measure
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Rate of return on farm assets
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Payback method is measured in?
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Years
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When IRR= Discount Rate, what is NPV?
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Zero
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When Cost of Capital goes down, NPV?
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Goes Up
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When B/C is negative, and PVin<PVout , NPV=?
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Between 0 and 1
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Simple rate of return
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=Annual net income/ Initial investment made
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APR is the same as:
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THe internal rate of return (IRR)
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Is the principal portion of a loan payment tax deductible?
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No
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Tax Benefit from Depreciation Expense=
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Depreciation expense x (t)-tax rate
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Shape of the dominating set
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Upward sloping to the right
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Define Business Risk
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A variation in returns
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Two methods of asset valuation
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Historical Cost, and market value
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Market Value
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Historical cost of an asset- accumulated depreciation
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Historical cost
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The original cost of an asset, accumulated depreciation is not accounted for
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Definition: Finance
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ANything to do with the sources and uses of funds
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Production
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Combining inputs to create an output
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Sources of funds
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Equity, revenues, sale of capital assets, repayment of debts, withdrawals
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Uses of Funds
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Operating expense, purchase of capital assets, repayment of debt, withdrawals
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Points
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Interest paid before loan is funded, 1pt= 1% of original price
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Short term loan
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Loan<1 year
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Intermediate term loan
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loan from 1-10 years
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Long term loan
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Greater than 10 years
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Simple interest formula
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I=PRT
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Future value of a dollar
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FV=(PV)(1+i)^n
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Present value of a dollar
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PV= FV/(1+i)^n
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Present Value of an Annuity
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PVA= 1-(1+i)^-n/ i
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Future Value of an Annuity
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FVA= (1+i)^n-1/ i
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Equal payment amortization
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= i/1-(1+i)^-n
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Sinking fund
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=i/(1+i)^n-1
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Capital Budgeting
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the process of planning expenditures on assets with a productive life of>1yr ie- capital assets
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Net present Value=
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Sum PVinflows- Sum PV outflows
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Benefit cost ratio
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Sum PV inflows/ Sum PV outflows
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IRR
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discount rate at which SUM PV inflows= SUM PV Outflows
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IS deprecition expense accounted for in Capital budgeting?
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No
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Cost of Capital Formula
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Kc= WdKd+ WeKe
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Kc
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Cost of Capital as a rate
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Wd
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Debt to asset ratio
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Kd
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cost of debt (interest expense/ total lia)
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We
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Equity to asset ratio (total OE/ total assets)
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Ke
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Cost of equity (rate)
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Income tax effects cash how in cap budgeting?
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It is seen as a cash outflow
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Taxable cash income=
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Taxable cash revenues- taxable cash expenses
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After tax net cash inflow
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(taxable cash income)(1-t)+ (depreciation expense)(t)
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Net cash flow
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=Principal+interest+tax benefit
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Leasing PV
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= Net cash flow x PV factor(1+i^-n)
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Balance sheet
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Assets= Liabilities+ Owners equity (ALOE)
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Income statment
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Revenues- expenses= net income
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Owners equity
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Balance- Owner withdrawals= net income
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Statement of cash flows
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Cash Flow from operations
+cash flows from investing +cash flows from financing = net cash |
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Liquidity Ratios
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Current ratio, working capital
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Solvency ratios
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Debt to equity
Debt to asset Equity to asset |
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Profitability Ratios
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Asset turnover
Return on farm equity Operating profit margin ratio ROFA |
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FFSC Income statement format
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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 |
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Cash system
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Revenues recognized when payments recieved, expenses when paid
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Accrual system
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Revenues recognized when earned/ expense when incurred
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