Agriculture Reference
In-Depth Information
2. List and discuss three uses for the balance sheet and three uses for the income statement
for agribusiness managers.
3. What are the major sections of a balance sheet? Why does the balance sheet equation
always balance?
4. What are current assets? Why is the management of current assets so important to food
and agribusiness fi rms?
5. Why do accountants usually value assets at their cost or market value, whichever is lower?
6. Defi ne the difference between current and long-term liabilities. Why is this distinction
important?
7. What are the major sections of the income statement?
8. Discuss the meaning of depreciation and describe how it is treated on the balance sheet
and income statement. How is the amount of depreciation determined?
9. Defi ne the difference between expenditure and an expense from an accounting point of
view.
10. What is the difference between gross margin and net income, and how are those two
measures related?
11. Managers may have other business objectives besides making a profi t. What are three
examples of these objectives? Discuss how these objectives compete with the profi t
objective.
12. For the case study on Aggieland Landscaping company, assume two new landscape
fi rms have opened in Ted's trade territory. Ted now believes that instead of a net income
after tax of $55,000 in the coming year, his business will only generate a profi t of
$30,000, excluding the gain on the equipment sold. If none of his other assumptions
change, how much will he need to borrow to buy the new equipment? Is this a good
idea, given his new profi t forecast? Why or why not?
Case study: Julie Rowe
Julie Rowe graduated from high school fi ve years ago with a background in agronomy. Julie
had worked for a lawn care service until a year ago, when she decided to start her own busi-
ness selling soil testing kits to homeowners. Julie saved $10,000 during the past fi ve years.
She decided to invest the $10,000 in a proprietorship to sell the soil testing kits in her local
community.
Julie purchased the following capital items to start the business. First, she purchased a
service truck that cost her $40,000, which she estimates will last for another fi ve years.
Second, she purchased her own storage tank for gasoline to be used for the truck, and this
cost another $1,000. Third, she purchased a computer and some other offi ce equipment for a
total of $4,000.
She spent $4,750 for gas and other supplies. Julie calculated she needed at least $1,000 to
make ends meet before she received the fi rst check. Julie also spent $19,250 to purchase kits
that will be placed in inventory. Julie's sister agreed to keep the topics. Julie's father let her
use the family garage for an offi ce and agreed not to charge rent the fi rst year. Julie's father
was willing to lend her $10,000. The principal is to be repaid in 18 months. The interest rate
is 6 percent per year. At the end of 12 months Julie will repay her father the interest for 12
months, but no principal. At the end of 18 months Julie will pay her father interest for six
months, plus all principal owed on the loan.
Julie borrowed the balance of what she needed from First National Bank. The loan was to
be repaid in fi ve equal, annual principal payments, with interest at an annual rate of 7 percent.
