Unit 3 Flashcards
(11 cards)
If a farm has Net Farm Income from Operations of $100,000, and an opportunity cost total of $50,000, what is the farm’s return to equity?
50,000
100,000 - 50,000 = 50,000
NFIO - OCL&M = RTE
An asset with an original cost of $5,000, a salvage value of $1,000, and a useful life of 4 years has an annual depreciation expense of?
$1,000
(5,000 - 1,000)/4»_space; 4,000/4 = 1,000
AD = (cost - salvage val)/useful life
If a farm has returns to assets of $1,000,000 and average assets of $100,000, what is the farm’s ROA?
10%
$1,000,000 / $100,000 = 10%
ROA (%) = (return to assets $)/(avg assets $)
Which of the following is true about the format of an income statement?
A) It is organized into two columns that balance B) It is organized in rows like a big subtraction problem C) It contains balances and flows organized into monthly columns D) It is an organized illustration of everything "owned" and "owed"
B) It is organized in rows like a big subtraction problem
Depreciation is:
A) A business expense that reduces annual profit B) A capital gain/loss that is only included in NFI C) Only included in the cash flow budget D) Only accounted for on land purchases
A) A business expense that reduces annual profit
A capital gain or loss is:
A) Part of operating expenses or revenues B) Income from investment activities C) Only shown on an accrual based income statement D) Only shown on a cash based income statement
B) Income from investment activities
The main method of calculating depreciation that we will use in this class is:
A) Double-Declining Balance B) Straight-line C) Accelerated depreciation D) Accrual based depreciation
B) Straight-line
When calculating straight-line depreciation, which of the following items do you not need to know?
A) Salvage value B) Depreciation amortization factor C) Original cost D) Useful life
B) Depreciation amortization factor
Depreciation
A) Only shows up on accrual based income statements B) Only shows up on cash based income statements C) Is a cash expense paid to lenders D) Is shown on all income statements
D) Is shown on all income statements
An income statement is a summary of:
A) Revenues and expenses B) Inflows and outflows C) Liabilities and equities D) Assets and liabilities
A) Revenues and expenses
An assets original cost minus any accumulated depreciation equals:
A) Salvage value B) Book value C) Market value D) Sentimental value
B) Book value
