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257 Cards in this Set

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Accounts
The basic storage unit for accounting data used to accunulate amounts from similar transactions; constitutes the core data elements of the financial system
Accounts Payable
Claims against the farm or ranch business which have yet to be paid.
Accural Accounting method
Gross income and expenses are included in the accounting period in which the earned or incurred, regarless of when the payment is recieved. This method recognizs the importance of transactions, such as changes in inventory, changes in accrued interest, and changes in accounts payable and accounts receivable.
Accured Interest
Interest owed but not yet paid.
Adjusted Basis
the original cost of an asset plus the value of any improvement or alterations less sthe amount of depreciation, losses, or depletion. Adjusted basis is used to calculate depriciation and capital gain. BOOK VALUE
Administrator/Administratirix
A person legally vested with the right of administration of an estate.
Allocations
The process of assigning costs of one segment of the organization to other responsibility centers ni some systematic manner. Allocation criteria typically focus on the best objective and measurable way a particular segment provided support to other cost or profit centers of the organization.
Amortization
The repayment of a loan and the interst due with a series of equal payments over a specified period of time.
Annual Percentage Rate (APR)
INTEREST RATE
Annuity
The receipt of (or the making of) a series of uniform payments over a specified period of time.
Appraisal
An estimate of the fair market value of personal property or real estate by a certified appraiser.
Assets
Economic resources controlled by the farm or ranch business
Average Output or Yield
total units of output divided by the number of units of input
Balance Sheet
NET WORTH STATEMENT
Basis
ADJUSTED BASIS
Basis, Marketing
In future contract trading, the difference between the local cash market price and the price of the near term (expiring) futures contract.
Bear
A market participant who believes prices are too high and will decline
Bear Market
A downward trend in market prices
Beneficiary
Person named in an insurance policy to receive proceeds at death of the insured.
Benefit/Cost Ratio
An investment analysis ration equal to the present value of all future benefits of an investment divided by the present value of all future costs
Breal-Even
The output required for revenue to equal the total of fixed and variable costs.
Breeding Livestock
Livestock held for reproduction.
Budget
A schedule of expected returns and costs.
Bull
A market participant who belives prices are low and will advance.
Bull Market
An upward trend in market prices.
Call Option
The right to buy an underlying futures contract or publicly traded stock at a specific price before a certain date.
Capital
Non-human resources used int eh productin of goods and services. Examples are buildings, machinery, equipment, and cash.
Capital Budgeting
The process of estimating the profitability of an investment, or comparing the profitability of two or more alternative investments. INVESTMENT ANALYSIS
Capital Gain(Loss)
the gain (loss) realized from the sale of a capital asset when the asset is sold for more (less) than its adjusted basis.
Capital Lease
A financial agreement to purchase an asset which in turn may have a value.
Basis, Marketing
In future contract trading, the difference between the local cash market price and the price of the near term (expiring) futures contract.
Bear
A market participant who believes prices are too high and will decline
Bear Market
A downward trend in market prices
Beneficiary
Person named in an insurance policy to receive proceeds at death of the insured.
Benefit/Cost Ratio
An investment analysis ration equal to the present value of all future benefits of an investment divided by the present value of all future costs
Breal-Even
The output required for revenue to equal the total of fixed and variable costs.
Breeding Livestock
Livestock held for reproduction.
Budget
A schedule of expected returns and costs.
Bull
A market participant who belives prices are low and will advance.
Bull Market
An upward trend in market prices.
Call Option
The right to buy an underlying futures contract or publicly traded stock at a specific price before a certain date.
Capital
Non-human resources used int eh productin of goods and services. Examples are buildings, machinery, equipment, and cash.
Capital Budgeting
The process of estimating the profitability of an investment, or comparing the profitability of two or more alternative investments. INVESTMENT ANALYSIS
Capital Gain(Loss)
the gain (loss) realized from the sale of a capital asset when the asset is sold for more (less) than its adjusted basis.
Capital Lease
A financial agreement to purchase an asset which in turn may have a value.
Capitalization
Proces for placing a current value on an asset based on its expected future earning power and the expected interest rate.
Cash
Cash or access to accounts where cash may be withdrawn within one year. Cash is a capital resource.
Cash Accouting Method
All incone and expenses, whether received in cahs or property, are included in the accounting period they are received.
Cash Flow Statement
Shows cash received and spent during an accoutning period, usually one year. When calculated over several periods, cash flow shows the use and requirements for cash over time.
Cash Flow Projection
The listing of all anticipated cash inflows for a period of time, usually one year, both farm and non-farm, and all projected cash outflows, including farm operating expenses and capital outlays, along iwth family living expenses and tax payments.
Cash Value of Life Insurance
Cash available for borrowing or redemption but not the death benefit.
Chart of Accounts
A list of account titles used to classify transactions in the general ledger, the consisten use of these accounts is essential for both internal usage and for the creation of industry-wide standard information.
Collateral
Assets used to secure a loan.
Commodity
Raw materials or semi-processed goods that can be bought and/or sold for further processing.
Comparative Analysis
the comparison of expected results from different action, approaches, or enterprises during the same time period.
Compounding
Interest received from an investment is added to the principal and interest is paid again on the total sum. It can be used to determine the future value of hte amount of money that you now have. The opposite procedure from DISCOUNTING.
Constnat Rate of Substitution
When one input, financial or physical, subsitutes for another at the same rate for each additional unit of input.
Contingent Tax
Tax owed if all assets could be liquidated for exactly the amount shown on teh balance sheet and all liabilities could be satisfied for the amount shown on the balance sheet.
Contract
An informal or formal written document or oral agreement that is a binding agreement between two or more people or businesses.
Cooperative
A corporation formed by a group of people-members-to provide specific products and/or services to themselves.
COOPERATIVE MARKETING
A process whereby producers pool their resources for shipment to market in an effort to increase bargaining power. It may also be used for pooling for purchase of inputs.
CORPORATION
A legal entity that can own property and conduct business. The entity is separate and distinct from its owners and managers. Shareholders own the corporation. Officers manage the corporation.
COST OF PRODUCTION
Costs of the fixed and variable inputs needed to obtain output.
COST CENTER
Support activities important to and used by profit centers (i.e., an equipment cost center supports the crop profit centers). (See PROFIT CENTER)
CREDIT
An addition to revenue, net worth or any other account.
CURRENT ASSETS
Cash, marketable securities, accounts and notes receivable, prepaid expenses, and inventories which are expected to be converted to cash within one year (or operating cycle if longer).
CURRENT LIABILITIES
Debt payments that must be paid within one year (or operating cycle if longer). Includes interest accrued on loans at the time the net worth statement is prepared, principal payments, and other obligations.
CURRENT RATIO
Current assets divided by current liabilities.
CUSTOM WORK
Farm work performed for a charge involving the use of machinery and labor provided by someone other than the farm operator.
DEBIT
An addition to an expense or asset account or a deduction from a revenue, net worth, or liability account.
DEBT
A financial obligation to pay in the future.
DEBT/ASSET RATIO
total farm liabilities divided by total farm assets multiplied by 100.
DEBT to EQUITY RATIO
Total liabilities divided by total farm equity.
DEED
A document that shows the exact size, location, ownership and method of ownership of real property. (See QUIT CLAIM DEED and WARRANTY DEED)
DELIVERY MONTH
The calendar month during which a futures contract matures.
DELIVERY POINTS
Those locations designated by commodity exchanges at which a commodity covered by a futures contract may be delivered in fulfillment of the contract.
DEMAND
The quantity of the good which consumers are willing to purchase at alternative prices in a given period of time. As the price of a good increases, consumers will generally purchase less of the good, assuming everything else remains constant.
DEMAND SHIFTERS
A change in the price of substitutes, income, and/or taste will cause the demand curve to shift left or right. Such a shift will result in a change in quantity purchased at a given price.
DEPLETION
Using up or consuming assets. Or the process of allocating the cost of natural resources to the periods in which the resources are used.
DEPRECIATION
A method of prorating the cost of a capital asset over its useful life. A decrease in value of a capital asset that occurs regardless of repair and maintenance due to wear, tear, and/or obsolescence (see Farmer's Tax Guide for tax depreciation methods).
DIMINISHING MARGINAL RETURNS
As the amount of one input is added in production, all other inputs remaining constant, the output will increase at an increasing rate, then increase at a decreasing rate, reaches a maximum, and then declines.
DISCOUNTING
A calculation used to determine the current or present value of a cost or receipt expected in the future. Discounting adjusts for the time value of money. The opposite procedure from COMPOUNDING.
DIVERSIFICATION
Engaging in several enterprises or activities to protect against the risk of failure or disasters or to fully use available resources.
DIVIDENDS
A portion of a corporation’s profits divided among its shareholders according to the number of shares each shareholder owns. The board of directors makes dividend distribution decisions.
DOUBLE ENTRY
An accounting system that keeps track of assets and liabilities simultaneously. Every credit is balanced by a debit entry.
ECONOMIES OF SCALE
A situation where the ratios of inputs used in production remain the same as the output of the farm or ranch business is increased.
ECONOMIES OF SIZE
A situation where the total cost per unit of output decreases as a result of increases in the size of the business. As farms and ranches become larger, the relative proportions of land, labor, and capital typically change.
EFFECTIVE DEMAND
The desire and ability of the consumer to obtain a commodity. The amount of a commodity that a consumer is willing and able to buy.
EFFICIENCY
A ratio of output to input. Economic efficiency refers to the ratio of output value to output cost. Production efficiency refers to the ratio of output quantity to input quantity.
ELASTICITY
The percentage change in one variable in response to a percentage change in another variable. Price elasticity of demand refers to the percentage change in the quantity of a good that is purchased in response to a one percent change in price. Price elasticity of supply refers to the percentage change in the quantity of a good that is supplied in response to a one percent change in price.
ENTERPRISE
A specific process or activity producing a single output.
ENTERPRISE BUDGET
An enterprise budget shows the expected returns and costs associated with a specific production activity (e.g. soybeans) while a whole farm budget shows the expected returns and costs associated with all the enterprises in a business.
ENTITY
Something that has a separate and distinct existence. For example, a corporation is an entity that is separate and distinct from its owners and shareholders. A corporation can continue to exist even if its owners and shareholders change.
EQUILIBRIUM PRICE
The price at which the quantity supplied is equal to the quantity demanded for a particular commodity at a given time and place. Also called MARKET CLEARING PRICE.
EQUITY
The financial measure of the value of a business or person. The value is derived by subtracting the amount of total liabilities from the value of all assets under the control of a business or individual. Calculated on a cost or market value basis. Also called NET WORTH OR OWNER EQUITY.
EQUITY/ASSET RATIO
total farm equity divided by total farm assets multiplied by 100.
ESTATE
The total value a person has in all property, real and personal.
ESTATE PLANNING
The legal, economic and social act of determining the allocation of a person's property to appropriate heirs. It takes into account the laws of wills, taxes, insurance, property, and trusts and carries out a person's wishes for the disposition of property at death.
EXECUTOR/EXECUTRIX
A person appointed in a will or by the court system to carry out requests and dispose of all property in accordance with the laws and desires of the deceased.
EXPENSE
Any costs associated with producing a product.
FACTORS OF PRODUCTION
Resources or inputs that are used in the production process. Also called INPUTS.
FAMILY LIVING WITHDRAWALS
The total amount of money withdrawn from farm and non-farm revenues for personal consumption or use.
FARM FINANCIAL STANDARDS COUNCIL
A committee devoted to improving and standardizing farm and ranch financial records
FIELD EFFICIENCY RATIO
The ratio of the actual performance of a farm machine to its ideal or theoretical capacity.
FIRM
A business unit using resources to produce a products or service.
FIXED ASSETS
See NON-CURRENT ASSETS.
All assets controlled by the farm or ranch business having a life greater than one year.
FIXED COSTS
The costs incurred by the firm that does not vary with the level of production.
FIXED INPUT (or RESOURCE)
A factor of production whose quantity is given and does not vary with the level of production.
FIXED LIABILITIES
See NON-CURRENT LIABILITIES.
Liabilities due past (or after) one year.
FIXED RATIO
Fixed costs divided by gross income.
FORWARD CONTRACT
A written agreement that specifies that a certain commodity will be delivered at a particular location at a future time for an exact price.
FREE MARKET
A market where there is an interaction of supply and demand, without interference of government controls, tariffs, monopolies, or other artificial barriers to the supply and demand of a commodity.
FUTURES CONTRACT
An agreement to buy and receive or to sell and deliver a specific commodity at a future date and place. The contract written by a commodity exchange includes the specific characteristics of the delivery.
FUTURE VALUE
The value at some time in the future of an asset or liability after it has been compounded with interest for a specified period of time.
GENERAL LEDGER
The collection of all accounts maintained by an organization from which summary information is obtained to generate financial statements and other management reports and performance measures.
GOAL
the end toward which effort is directed. More general or “big picture” statements associated with a business’ mission.
GOODS
tangible items that are produced by a business or firm from combining inputs. Tangible means physical outputs that can be touched. See SERVICES. Using the term PRODUCTS refers to both goods and services.
GROSS RATIO
Total expenses (fixed and operating) divided by gross income.
GROSS RETURNS OR GROSS RECEIPTS
Gross income before expenses are deducted.
GROWING CROPS
Crops yet to be harvested when they are inventoried.
HEDGING
The selling of a commodity futures contract to protect a producer from price fluctuations in the marketplace at the time the product is sold. Hedging insures against substantial loss but also prevents windfall gains. Hedging can also be used in the purchase of inputs.
HORIZONTAL INTEGRATION
Combining two or more firms at the same stage of production or marketing. See STAGES OF PRODUCTION--The steps that are followed as factors of production are combined to produce a product that is demanded by the final customer or consumer. The steps start at the very basic raw material gathering stage and progress to sale of the finished product to the customer.
INCOME
The amount of money received from selling a product or providing a service. Broadly refers to the difference between revenue and expenses.
INCOME AVERAGING
An income tax reporting strategy in which part of an unusually large amount of taxable income in one accounting period is combined with a lower amount in another accounting period whereby the average amount of tax is reduced.
INCOME STATEMENT
A financial statement that lists the cash and non-cash receipts and expenses of a firm or individual during a specified period of time, usually a year. Also called PROFIT-AND-LOSS STATEMENT or OPERATING STATEMENT.
INFLOWS
Money received by a business or person regardless of how it was generated.
INPUT
A factor of production that is added such as land, labor, capital, or raw materials.
INSURANCE
Economic device whereby an individual or firm substitutes a certain cost (premiums) for an uncertain financial loss (risk insured against).
INSURANCE PREMIUM
The payment to an insurance company by a policyholder to purchase and maintain an insurance policy.
INTEREST
The rental charge for the use of principal. The expense incurred for borrowing money or the revenue generated from lending money.
INTEREST RATE
Percent charged on principal for the use of money. Always expressed as an annual rate. Also called ANNUAL PERCENTAGE RATE (APR).
INTERNAL RATE OF RETURN
The discount rate that makes the present value of a flow of revenues and costs equal to zero. An investment 'break-even' analysis. A present worth technique that compares the present value of expected receipts to the present value of expected costs. This allows the investor to compare investments and determine if an investment is potentially profitable.
INVENTORY
A physical count of all assets in a business. Usually done once every year for investment analysis or income tax purposes. An inventory may be done continuously to monitor available assets.
INVESTMENT
The act of putting money into business, real estate, stocks, bonds, etc. for the purpose of obtaining income or profit.
INVESTMENT ANALYSIS
See CAPITAL BUDGETING--The process of estimating the profitability of an investment, or comparing the profitability of two or more alternative investments.
LAW OF DIMINISHING RETURNS
When successive units of a variable input are added to the production process (all other inputs remaining fixed) the resulting output increases at an increasing rate, then increases at a decreasing rate, reaches a maximum, and finally decreases.
LEASE
A formal agreement by which a person (the lessor) grants the right to use an asset to another person (the lessee) for a specific time and use in exchange for cash or value.
LEVERAGE
Using borrowed capital to increase the return on equity capital. It can also increase losses in the event of decreasing price.
LEVERAGING
A strategy of acquiring assets with a large proportion of borrowed funds.
LIABILITIES
Claims against a business. The amount of money owed on a net worth statement. Also referred to as DEBTS. Liabilities are classified as current and non-current.
LIABILITY
A claim against an individual/entity to compensate a second person for a physical injury or an economic loss caused by the negligence of the first individual/entity.
LIEN
Right of creditor to have a debt satisfied from real or personal property belonging to the debtor if the debtor defaults on regular payment of the debt.
LIQUIDITY
Refers to the ease with which assets may be converted to cash. Used to measure a firm's capacity to generate sufficient cash to meet its financial obligations.
LIMITED LIABILITY
In the corporate form of business ownership, the shareholders are not personally responsible for business debts. Their liability is limited.
LIMITED LIABILITY CORPORATION (LLC)
A type of business organization that achieves the favorable tax attributes of a partnership, the limited liability of a corporation, and a high degree of flexibility to fit business needs.
LONG
The action of taking a position in which one has bought futures contracts (or the cash commodity) without taking the offsetting action. Also called going long.
LONG-TERM ASSETS
All assets controlled by the farm or ranch business having a life greater than one year.
LONG-TERM LIABILITIES
Liabilities due past (or after) one year.
MANAGERIAL ACCOUNTING
System organized to allow the owner/manager to magnify specific segments and/or activities of the business. Managerial accounting is especially useful to those operations that have employees managing certain activities or segments of the business; want to enhance profitability; and want to more effectively manage segment assets and control costs.
MARGIN
In futures contract trading, the amount of money deposited by buyers and sellers of futures contracts to ensure performance. This serves as a performance bond rather than a "down payment." If a futures contract moves against an investor, the broker may require additional margin payments.
MARGINAL
Added or additional.
MARGINAL COST
The change in total costs, or total variable costs, due to the production of one more unit of output.
MARGINAL FACTOR COST
The change in total factor costs due to the use of one more unit of a variable input.
MARGINAL PHYSICAL PRODUCT
The change in total output or product due to the use of one more unit of a variable input
MARGINAL VALUE PRODUCT
The change in total value product due to the use of one more unit of a variable input.
MARKET
A place where the exchange of commodities between a buyer and a seller occurs
MARKETING
All of the processes and services involved in moving a commodity from the producer to the ultimate consumer. The activity involved in buying and selling a product. See STAGES OF PRODUCTION--The steps that are followed as factors of production are combined to produce a product that is demanded by the final customer or consumer. The steps start at the very basic raw material gathering stage and progress to sale of the finished product to the customer.
MARKETING MARGIN
The difference between the amount consumers pay for the final product and the amount producers receive.
MARKET VALUE
Fair market value of an asset minus the selling cost. The estimated amount of cash you would receive for selling an asset today, after deducting all expenses of the sale
MARK-UP
An increase in selling price over purchase price. Generally expressed as a percentage of the purchase price or the selling price.
MAXIMIZE RETURNS
Realizing the greatest amount of return on an investment. Occurs where MARGINAL COSTS equals MARGINAL REVENUE.
MONOPOLY
The marketplace has only one firm that is selling products or services
MORTGAGE
The use of property, usually real estate, as collateral for a loan. Frequently used to refer to the loan itself
NET CAPITAL RATIO
A financial measure of solvency where the total assets are divided by the total liabilities. The quotient must be above 1 for the business to be solvent.
NET FARM INCOME
The returns to unpaid family and operator labor, management and equity capital. May be calculated as total operating receipts minus total operating expenses equals net cash income minus non-cash adjustments (inventory, receivables, payables).
NET INCOME
The difference between revenue and expenses.
NET POSITIONS
In futures contract trading, the difference between the open contracts long and the open contracts short held in any one commodity. By definition always zero for the whole market.
NET PRESENT VALUE
The projected net cash flows from an investment are discounted by a specified rate and compared to the cost of the original investment. The investment is considered acceptable if the present value of the discounted projected cash flow is greater than the original investment
NET RETURNS
The financial returns after all costs have been paid. Net returns are usually a residual as net cash income or net farm income.
NET WORTH
Total assets minus total liabilities. Also called OWNER EQUITY or EQUITY
NET WORTH STATEMENT
A financial statement with a list of assets, liabilities, owner equity and their relationship to each other at a particular time, usually at the end of the accounting period. It is the picture of the business on a particular date. Also called BALANCE SHEET, FINANCIAL STATEMENT, or STATEMENT OF FINANCIAL CONDITION.
NON-BREEDING LIVESTOCK
Livestock whose ultimate purpose will be slaughter or resale, but not reproduction.
NON-CURRENT ASSETS
All assets controlled by the farm or ranch business having a life greater than one year.
NON-CURRENT LIABILITIES
Liabilities due past (or after) one year.
OBJECTIVE
some thing toward which effort is directed. More specific that goals. Usually expressed in terms of a quantifiable activity to be completed in a state period of time.
OFFSET
In futures contract trading, the liquidation of a purchase of futures through the sale of an equal number of contracts for the same delivery month, or the covering of a short sale of futures contracts through the purchase of an equal number of contracts of the same delivery month. Either action transfers the obligation to make or take delivery of the actual commodity to another trader.
OLIGOPOLY
The marketplace has a small number of firms that are selling products or services.
OPEN CONTRACTS
Open futures contracts that have been bought or sold without the transaction having been completed by subsequent sale or repurchase, or actual delivery or receipt of commodity.
OPERATING EXPENSES
Expenses incurred in the normal production cycle, excluding interest, depreciation, family living, income tax and investments.
OPERATING LOAN
A short-term loan made to acquire assets used to complete the production cycle. Operating or short-term loans are usually paid back in a year or less.
OPERATING RECEIPTS
Receipts generated from the normal production cycle, such as sale of crops, livestock, and custom work. Excludes money from the sale of capital assets.
OPERATING RATIO
Total operating expenses divided by operating receipts.
OPPORTUNITY COST-
The cost that is measured by the income a factor of production would receive in its best alternative use.
OPTIONS
In futures contract trading, an option gives the owner the right to buy (call option) or sell (put option) a futures contract for a certain price, called the strike price, for a limited period of time.
OUTFLOWS
All expenditures by a business, individual, or entity regardless of how they were generated.
OUTPUT
Unit of production resulting from the combination of variable and fixed inputs. The quantity of goods and services produced.
OVERHEAD
Expenses incurred in the operation of a business that cannot conveniently be attributed to the production of a specific commodity, product, or service.
OWNER EQUITY
Assets minus liabilities. Use this term when presenting a balance sheet for a business enterprise that contains no personal information. Also called EQUITY CAPITAL or NET WORTH.
OWNER'S EQUITY RATIO
Net worth divided by total assets. Shows the proportion of a firm's total assets belonging to the firm's owners.
PARITY PRICE
A hypothetical price which a farmer must receive for a commodity to be able to buy the same amount of goods and services now that it would have bought in some base-year time period.
PARTIAL BUDGETING
Comparison of projected costs and returns associated with some change in the operation of the business. The components of the partial budget are added revenue, reduced expense, added expense, and reduced revenue.
PARTNERSHIP
A business entity created when two or more persons join together to conduct a business and to share in its profits and losses.
PATRON
A member and customer of a cooperative
PATRONAGE DIVIDENDS
In a cooperative, the portion of business profits (net operating savings) returned to a member doing business with the cooperative. The amount is determined according to the percentage of business generated by the member, not by the percentage of stock owned by the member.
PERSONAL PROPERTY
Property that is not permanently in place but is temporary or movable. In general, all property that is not real property.
PERFECT COMPETITION
A marketplace where there are many businesses producing the same product and many buyers are buying the product. No single buyer or seller can influence the price. No producer or buyer is so large as to control or perceptively affect market supply or demand. Also called pure competition.
PREPAID EXPENSES
Prepaid expenses includes amounts for feed, seed, fertilizer, chemicals, and other inputs which have been paid from the farm account, but not yet received or used in production.
PRESENT VALUE
The value, at this point in time, of income to be received at some future time. See COMPUNDING--Interest received from an investment is added to the principal and interest is paid again on the total sum. It can be used to determine the future value of the amount of money that you now have. and DISCOUNTING--A calculation used to determine the current or present value of a cost or receipt expected in the future. Discounting adjusts for the time value of money.
PRICE CYCLE
Changes in price which tend to follow a repetitive pattern over a period of years
PRICE SEASONABILITY
Changes in price which tend to follow a predictable pattern within a year.
PRINCIPAL
An amount of money borrowed, invested, or used on which interest accrues.
PROBATE
The procedure or process of establishing the validity of the will of the deceased and administering the settling of an estate.
PRODUCER
A person or firm who either produces, manufactures, or creates utility in a commodity or a service as it moves through the marketing channel
PRODUCTS
Items that satisfy the wants and needs of consumers or customers. Also called OUTPUT, GOODS and SERVICES.
PRODUCTION
A process that transforms one or more inputs into one or more products.
PROFIT
The excess of receipts over the payments for all factors of productions (accounting concept). The excess of receipts over the value of all factors of production. For management, it usually refers to a return to some residual.
PROFIT CENTER
The profit making activities within your business (i.e., pork, cattle, and certain crops, etc).
(See Cost Center)
PRO FORMA
projection or estimate of future performance. As in a pro forma income statement.
PROJECTED ANALYSIS
A financial estimate of what a business or enterprise will be able to do at point in time in the future. Often it is a projected cash flow that shows expected receipts versus expected expenses.
PROPRIETORSHIP
A business where an individual owns, manages, assumes all the risk, and derives all the profits from a business. Also called an individually owned business.
PUT OPTION
The right to sell an underlying futures contract. Put does not obligate a sale, it only gives the right of the owner of the contract the right to sell
QUANTITY DEMANDED
The quantity of a good or service consumers are willing and able to purchase at a given price in a specific time period
QUANTITY SUPPLIED
The quantity of a good or service producers are willing and able to produce (and sell) at a given price in a specific time period
QUICK RATIO (ACID TEST)
Cash and receivables divided by current liabilities.
QUIT CLAIM DEED
A written statement that the seller of property gives to the buyer that "gives up" only the seller’s right to the property. The property may have other claims from outside parties.
RATIO
Relationship in quantity, amount, or size between two or more things
REAL PROPERTY
Land, and generally whatever is erected or growing upon or affixed to the land.
RECEIPTS
Cash income flowing into a business.
RESOURCES
All inputs used in the production process.
RETAINED EARNINGS
The amount of net income that has accumulated in a farm or ranch business since it began that has not been withdrawn by the owner(s) or paid out as dividend to shareholders. Retained earnings are part of owner equity.
RETURN ON ASSETS (ROA)
The percentage rate earned on the total assets invested.
RETURN ON INVESTMENT
The income or profit realized from an investment. Many times we refer to percentage return on investment.
REVENUE
Gross receipts from the sales of farm or ranch products, services, participation in government programs, and other business operations. Receipts may be cash, accounts receivable, or increases in inventories.
RISK
Unexpected circumstances where the probability of an event occurring can be empirically determined.
SALVAGE VALUE
Value of an asset at the end of its useful life.
SERVICES
Intangible things that are produced by a business or firm from combining inputs. Intangible means outputs that are hard to physically touch. See GOODS. Using the term PRODUCTS refers to both goods and services.
SHORT
In futures contract trading, the action of taking a position in which one has sold futures contracts (or made a forward contract for sale of the cash commodity) without taking the offsetting action.
SHORTAGE
A condition that exists when the quantity supplied is less than the quantity demanded at some given price in a given time period.
SIMPLE INTEREST
Product of the principal, the time in years and the annual rate of interest.
SINGLE ENTRY
An accounting system that does not maintain debits and credits for each account.
SOLE PROPRIETORSHIP
A business where an individual owns, manages, assumes all the risk, and derives all the profits from a business. Also called an individually owned business.
SOLVENCY
Firm's ability to meet long run claims against the business. Solvency indicates that total assets exceed total liabilities. To be solvent the net capital ratio should be greater than one.
SPECULATOR
A person who attempts to anticipate price changes and through market activities to make profits. In futures contact trading, a speculator is not hedging.
SPOT PRICE
The price at which a physical commodity is selling at a given time and place.
STAGES OF PRODUCTION
The steps that are followed as factors of production are combined to produce a product that is demanded by the final customer or consumer. The steps start at the very basic raw material gathering stage and progress to sale of the finished product to the customer.
STORED CROPS
Crops in inventory in which the market value of the crops have yet to be received.
SUBCHAPTER S CORPORATION
A business organization that is structured as a corporation and that qualifies as a corporation for all purposes except taxation.
SUPPLY
The amount of commodities or services that would be offered for sale by a producer or group of producers (supplier or group of suppliers) in a specific market at a given series of prices during a specific time period, assuming everything else remained constant.
SURPLUS
A condition that exists when the quantity supplied is greater than the quantity demanded at some given price.
TAXABLE INCOME
Adjusted gross income less all itemized deductions and personal exemptions.
TERM DEBT COVERAGE RATIO
This ratio measures the ability of a borrower to cover all required term debt payments. Term Debt Coverage Ratio equals (net farm income from operations + non-farm income + depreciation expense + interest on term debt - income tax expense - family living withdrawals) divided by (annual scheduled principal and interest payments). The higher the ratio is above 1, the greater is the margin to cover the payments.
THEORETICAL CAPACITY
Rate, in acres per hour, at which a machine is working when no time is lost due to turns, unused width, stopping, plugging or breakdowns.
TIME VALUE OF MONEY
A method of analyzing capital investments based on the principle that a dollar received today is valued more highly than a dollar received tomorrow or any time in the future. Two adjustments are Compounding is used to determine the value of money at a point in time is known. DISCOUNTING is used to find the value of the money today when its value at some future date is known.
TOTAL COSTS
The sum of all costs (fixed and variable) incurred to produce a given level of production.
TOTAL REVENUE
Revenue obtained from the sale of output; found by multiplying the price per unit by the number of units sold. Also called total receipts.
TOTAL VALUE PRODUCT
The value of total output produced as the result of using a specific combination of inputs.
TOTAL VARIABLE COSTS
The costs of all variable inputs incurred to produce a given level of production.
UNCERTAINTY
Where the probability of an event occurring cannot be empirically determined.
The manager does not know the future outcomes of decisions. Because of uncertainty, managers must consider risk. See RISK.
UNIT OF OUTPUT
Unit of production resulting from the combination of variable and fixed inputs.
UTILITY
Usefulness of a commodity as measured by its ability to satisfy human wants and needs.
VARIABLE COSTS
Costs which change directly with the level of production. Examples are feed, seed, fertilizer and fuel. Also called OPERATING COSTS. If the manager decided to stop production, these costs are avoidable.
VARIABLE INPUT
An input whose usage changes with the level of production.
VERTICAL INTEGRATION
Combining or coordinating under a single level of management two or more different stages of production or marketing from the initial raw product to the final product.
WARRANTY DEED
A written statement that the seller of property gives to the buyer that says the land is free from legal claims by outside parties.
WHOLE FARM OR BUSINESS ANALYSIS
A collection and evaluation of data that helps to identify factors affecting profitability and efficiency of the business.
WILL
A legal instrument used to distribute property upon death.
WORKING CAPITAL
Current assets minus current liabilities.