GEORGIA FFA FARM BUSINESS MANAGEMENT CONTEST 1997

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GEORGIA FFA FARM BUSINESS MANAGEMENT CONTEST

1997


Section I:

Multiple Choice
-
50 points

Section II:

Problems
-
50 points, 2 points each

Total Points
-
100 points


Instructions:

You will have two and one
-
half hours to complete both sections of this

exam.

Mark all of your answers on the separate answer sheet provided. Black out

completely the letter that corresponds to the best answer for each question. You may

mark on any portion of this test as needed.

************************************************
******************************

Section l: Multiple Choice


1.

Hedgers and speculators in the futures market are different in that...

a. speculators always want the price to decrease.

b. hedgers are more at risk.

c. speculators do not produce a product to

sell.

d. all the above.


2.

Speculators in the futures market...

a. cause confusion in the market.

b. accept the price risk the hedgers are seeking to avoid.

c. make a profit if prices increase.

d. should not be allowed.


3.

All of the following are
said to be inelastic with regard to demand except...

a. pork.

b. salt.

c. gasoline.

d. sugar.


4.

The total quantity of goods and services produced is called...

a. supply.

b. demand.

c. produce.

d. none of the above.


5. A plan that projects expect
ed returns and costs is called a...

a. supply and demand curve.

b. budget.

c. consumption plan.

d. hedge.



6.

A producer most often uses a cash flow statement to...

a. estimate the amount of credit needed and when it will be needed.

b. determine eq
uipment needs.

c. estimate potential cash overflow.

d. estimate when debt payments will come due.


7.

If the government allowed no immigration to this country and controlled illegal

immigration, the effect on agriculture would probably be...

a. a short
age of agricultural labor.

b. an increase in the hourly wage for agricultural workers.

c. an increase in the total cost of labor.

d. all the above.


8.

Which is an advantage of leasing land over land ownership?

a. more capital is available for other us
es.

b. the risk of decreasing land prices is avoided.

c. farm size can be varied easily.

d. all the above


9.

Suppose that the government passed a law setting the maximum interest rate that

could be charged to agricultural producers by commercial banks

at 5%. A likely

result would be that...

a. banks would begin requiring better record keeping by producers.

b. farmers would borrow more money from banks.

c. commercial banks would not make loans to farmers.

d. there would be little effect.


10. If b
eef cattle producers are making an unusually high profit, then one might assume...

a. other producers will enter the beef cattle business.

b. the supply of beef will increase.

c. A and B.

d. none of the above.


11. Suppose farmer Johnson buys a new cotton
picker for $160,000. It has a useful life

of six years and a salvage value of $40,000. What is the annual depreciation

using the straight
-
line method?

a. $20,000

b. $16,000

c. $12,000

d. $22,000


12. Returns to unpaid operator and family labor, eq
uity capital, and

management is:

a. net worth.

b. owner's equity.

c. net farm income.

d. capital gains.


13. Which of the following is NOT a variable cost?

a. livestock feed

b. depreciation

c. fuel

d. seed


14. A business that is owned and contro
lled by one person is a:

a. corporation.

b. limited corporation.



c. sole proprietorship.

d. partnership.


15. The ability of a business to pay off liabilities without disrupting business is termed:

a. solidity.

b. liquidity.

c. feasibility.

d. el
asticity


16. An agreement to buy and receive or to sell and deliver a commodity at an

upcoming date with certain specified characteristics is a:

a. hedge.

b. option.

c. futures contract.

d. put.


17. If demand for a product goes down and all other fa
ctors remain the same, then the

price of that product will probably:

a. decrease.

b. increase.

c. remain the same.

d. can't tell from the information given.


18. If the price of a product increases and the demand does not change, the demand

for the p
roduct is said to be:

a. inelastic.

b. elastic.

c. unitarily elastic.

d. solely elastic.


19. Suppose John Brown has 100 acres of cropland. He wants to plant it in corn

and soybeans. To decide what ratio of corn and beans will give him the most

r
eturns he should use a:

a. income statement.

b. cash flow statement.

c. partial budget.

d. balance sheet.


20. An advantage of a farm corporation is that:

a. it is less complicated and easy to organize.

b. it limits liability of the owners.

c. corpo
rations cannot be sued.

d. it is easier for corporations to get credit.


21. Which is
not

true about the value of money?

a. The value of money changes.

b. Inflation cheapens money.

c. Deflation increases the value of money.

d. One dollar received toda
y is worth less than a dollar received next year.


22. Ann knows that she will need $100,000 for living expenses when she retires in 20

years. She used __________ to determine how much she needs to invest today at 10%

interest to accumulate the needed f
unds.

a. trigonometry

b. geometry

c. compounding

d. discounting


23. Which of the following should
not

be depreciated?

a. trucks

b. land

c. buildings

d. tractors


24. With which method of record keeping is it easiest to determine the net farm income


and analyze the strong and weak points of an agricultural business from year to

year?

a. accrual method

b. cash method

c. shoe box method

d. judged on this factor alone, all are equal


25. Mr. Brown is the owner of the local hardware store. He do
es not farm but

likes to buy and sell in the futures market. He is a...



a. producer.



b. liquidator.



c. speculator.

d. hedger.


26. If all other factors remain the same and the supply of a product goes up, then the

price of that product will pr
obably...

a. fall.

b. rise.

c. remain the same.

d. go up, then back down dramatically.


27. If a tractor purchased in 1987 for $12,000 is valued at $14,000 today, then it has...

a. appreciated.

b. depreciated.

c. decreased in value.

d. hedged.


28.

A pork producer who does not produce this year will lose some money including

_____.

a. medicine

b. depreciation

c. feed

d. sales commissions


29. Which items are least readily converted into cash without loss?

a. current assets

b. intermediate or work
ing assets

c. crops held for sale

d. fixed or long term assets


30. A document that shows the exact size, location, ownership, and method of

ownership of property is a...

a. contract.

b. deed.

c. rite of habeas corpus.

d. budget.


31. Cash flow sum
maries, net worth statement, income statement, and

detailed enterprise analysis are all forms of:

a. records.

b. cash
-
flow analysis.

c. marketing.

d. budget analysis.


32. A cash
-
flow projection is defined as:

a. a written physical and financial plan
that is used to compare alternative


courses of action for the business.

b. the statistical calculation of the probabilities of success.


c. an estimate of monthly cash inflows and outflows over a period of time.

d. none of the above.


33. Whe
n the price of a product is increased with no change in factors other than

price, less product will be purchased. This is the:

a. Law of Supply.

b. Law of Demand.

c. Law of Elasticity.

d. Law of Price.


34. Examples of records for an income tax retur
n are:

a. hired help.

b. farm income and expenses.

c. depreciations schedule.

d. all of the above.


35. ____________ is a type of accounting system.

a. Financial

b. Single
-
entry

c. Cash method

d. Physical


36. The amount of products that are produced d
epend on:

a. new technology.

b. weather.

c. expected increase in their selling price.

d. all of the above.


37. What is the single best record keeping system for everyone?

a. Complete farm business analysis

b. Cash method

c. Accrual method

d. There is
no single best record keeping system for everyone


38. Money that is owed to you at the end of the year is termed:

a. liabilities.

b. capital assets.

c. accounts receivable.

d. accounts payable.


39. Which one of the following is not an example of mar
ket cost?

a. feed



b. livestock purchased for resale

c. fertilizer

d. raised breeding livestock


40. _____________ are the cash value of assets based on actual cost or market value

less sale expenses.

a. Current values

b. Book values

c. Cash receipts

d. Cash expenditures


41. There are several ways of transferring legal ownership of property from one person

to another. The most common are:

a. wills

b. contracts

c. gifts

d. all of the above


42. A riparian is someone who:

a. owns over 1,000 acres

of land.

b. owns cattle, hogs, and chickens.

c. owns land bordering a stream.

d. owns land bordering mountains.


43. Dane has a herd of Angus cows. One rainy night a driver runs into the fence and


then drives away leaving the fence broken. One of th
e Angus cows wanders out


on the road. Another car driven by Christy hits the cow. The cow dies and


Christy's car is damaged. Who is responsible?

a. Dane

b. The 1st driver who ran into the fence

c. Christy

d. No one is at fault


44. Most states have
laws that govern boundary fences. In some states the

fencing regulations are left largely to local government. Although, laws vary

and are subject to change, which one usually prevails?

a. There are certain stipulations made for materials used on insi
de fences.

b. If people build a fence between their property then the state pays for it.

c. No state laws require landowners to enclose their land with a fence tight enough and
strong enough to turn livestock.

d. There are state laws that require l
andowners to enclose their land with a fence tight
enough and strong enough to turn livestock.


45. Dana's cow gets out and is found by Chris. Chris has several options, which one

is NOT true?

a. The stray cow becomes the property of Chris after 24 ho
urs.

b. Chris can confine and care for the cow but he must make a reasonable


attempt to locate the owner of the stray.

c. Chris is entitled to make reasonable use of the stray cows.

d. When Dana comes for her cow, she must pay Chris for feed, housing,


care and other costs.


46. Cooperatives are best characterized by the fact that:

a. they operate on a profit basis.

b. membership in a cooperative is not voluntary.

c. each member has some voice in the cooperative business affair.

d. members do not

do business with the cooperative directly.


47. Failure to comply with the terms of a contract is known as:

a. Breach of contract

b. Forward contract

c. Inferred contract

d. None of the above


48. When demand and supply are equal, price is said to be
at:

a. an all time high.

b. an all time low.

c. equilibrium.

d. elasticity.


49. A person appointed in a will or by the court system to carry out requests and

dispose of all property in accordance with the deceased is a:

a. Guardian

b. Estate holder


c. Executor

d. Donor


50. Which of the following Net Capital Ratios would indicate the best financial

position? (Total Assets/Total Liabilities)

a. 2.50

b. 2.80

c. 1.75

d. 0.14


************************************************************************
******


1997 GEORGIA FFA FARM BUSINESS MANAGEMENT CONTEST


Section Il: Problems

******************************************************************************


Use the following information to answer questions 51
-
58.

Mr. Cash is examining the financial pe
rformance of his diversified livestock operation.

He has assembled the following data:

Checking account balance





$10,800

Savings account balance






$15,500

Supplies on hand






$ 1,000

Feed on hand






$ 3,000

Breeding herd






$75,000

Equipment






$30,000

Land and buildings





$27,000

Machinery loan






$20,000

Feedlot equipment loan





$15,000

Feed bill







$ 4,000

Interest on land and equipment payments



$20,000

Mortgage on farm






$35,000


51. What is the total value of the c
urrent assets?

A. $29,300

B. $26,300

C. $30,300

D. $25,400


52. What is the total value of the fixed assets for Mr. Cash's operation?

A .$27,000

B. $57,000

C. $29,300

D. $106,000


53. Mr. Cash's total assets amount to:

A .$106,000

B. $162,300

C. $133,0
00

D. $75,000


54. What is the total value of the intermediate assets?

A .$105,000

B. $162,300

C. $133,000

D. $79,000


55. What is the total of Mr. Cash's liabilities?

A. $88,000

B. $59,000

C. $80,000

D. $94,000


56. Mr. Cash's business is:

A. cur
rent.

B. intermediate.

C. insolvent.

D. solvent.


57. What is Mr. Cash's net worth?

A.
-
$67,400

B.
-
$67,700

C. $12,000

D. $68,300


58. What is Mr. Cash's debt
-
equity ratio?

A. 1.37


B. 1.7

C. 2.14

D. 1.2


*****************************************
*************************************


Income Statement Analysis. Use the following information from a forestry consulting

business to answer questions 59
-

62.



Income from timber sales

$34,000

Income from timber cruises



9,500

Income from l
and management


28,900

Building rent


6,800

Equipment rent


1,100

Increase in inventory of supplies


7,000

Hired labor expense


32,000

Cash operating expenses


900

Machinery depreciation


900


59. What is the
gross

cash

income for this business?

a. $51,459

b. $31,600

c. $72,400

d. $40,800


60. What is the
net

cash

income for this business?

a. $72,400

b. $31,600

c. $40,800

d. $37,700


61. What is the net income for this business?

a. $37,700

b. $31,600

c. $39,50
0

d. $23,700


62. If the owner worked in this business for 45 hours per week for 50 weeks, what is


the return per hour for his work?

a. $13.32

b. $16.76

c. $19.11

d. $13.45


*********************************************************************
*********


Use the following information to answer Questions 63
-

65. Wheat sells for S400

per bushel and nitrogen fertilizer sells for S.40 per pound.

~. _ .


Total pounds

of fertilizer

per acre


Total wheat

yield per acre


Additional

pounds of

ferti
lizer

applied


Additional

bushels

wheat per

acre


Cost of added

fertilizer


Return from

additional

yield


0


18










10


22


10


4


4


16


20


26


10


4


4


16


30


28


10


2


4


8


40


30


10


2


4


8


50


31


10


1


4


4


60


32


10


1


4


4


70


33


10


1


4


4


80


33


10


0


4


0


90


33


10


0


4


0

63. How much fertilizer should be applied to maximize profit?

a. 40 pounds

b. 60 pounds

c. 80 pounds

d. 90 pounds


64. What is the additional net profit from fertilizing with 30 pounds
of nitrogen


rather than using no fertilizer at all?

a. $8

b. $16

c. $28

d. $40


65. The economic principle demonstrated here is the:

a. principle of elasticity

b. principle of investment

c. principle of cash flow
d. none of these


*****************
*************************************************************

Problems 66
-

67.

Help Harvey decide how he should market his hogs, given the

following information.


-


he has 200 hogs weighing 240 pounds each

-


he can get:

47 cents per pound at the lo
cal market in Macon

49 cents per pound at Thomasville

48 cents per pound at Cordele

50 cents per pound at Baxley

-


it will cost him:

$100 to deliver them to Macon

$200 to deliver them to Thomasville

$550 to deliver them to Baxley

$150 to deliver t
hem to Cordele


66. Harvey should sell his hogs at:

A. Macon

B. Thomasville

C. Baxley

D. Cordele


67. Suppose his break
-
even price is 44 cents per pound. What will his profit be if his

selling price is 52 cents per pound?

A. $1696

B. $1786

C. $2329


D. $3840


**************************************************

Balance Sheet Analysis. Problems 68
-

71.

Use the following information to answer questions 68
-

71.

Cash and checking account balance

$ 13,500

Mortgage on land


220,000

Value of machinery


50,000

Value of land


250,000

Value of feeder livestock


20,000



Loan at bank (due in 90 days)


90,000

Loan on machinery


20,000

Value of grain in storage


15,000

Interest due and payable


3,000


68. This producer has assets with a
total value of ___________.

a. $88,500

b. $103,500

c. $203,500

d. $348,500


69. This producer has a net worth of ___________.

a. $102,500

b. $15,500

c. $118,500

d. $235,500


70. What is the producer's equity ratio? (Also known as Debt
-
to
-
Net Worth)
(Total

Liabilities divided by Net worth)

a. 52

b. 1.41

c. 2.85

d. 21.48


71. Which of the following statements is true of this producer's situation?

a. This producer owes more than his equity in the farm.

b. A lender will probably not lend money to
this producer.

c. This producer's debt equity ratio is unsafe for the producer and the lender.

d. All of the above statements are true.


******************************************************************************

Mr. Whitehead is doing an end
-
of
-
the
-
year analysis on his cotton mop. Answer

questions 72
-
75 based on his cotton crop data.


900 acres were planted

600 acres were leased at $120 per acre

Interest on mortgage payment on 300 acres =$28,000

price per pound = $ .81

Total yield = 1,784 bales

(one bale equals 500 Ibs.)

Fertilizer cost = $52,875

Insecticide and Herbicide cost = $84,545

Labor cost= $32,695

Equipment cost= $128,935

Other variable cost = $87,540


72. What was his total yield per acre?

A.1.25 bales

B.2 bales

C.1.98 bales

D
.1.79 bales


73. What is his gross income from his cotton crop?

A.$1445.04

B.$235,930

C.$288,805

D.$722,520


74. What is his net profit from the harvest of his cotton crop?

A.$288,805

B.$722,520

C.$235,930

D.$268,625


75. What is the break
-
even pri
ce per pound for his cotton crop?

A.$.55

B.$.67

C.$.32

D.$.47



THE END!

Test written by Alan D. McAllister, EdD


Answers:


1.

C

2.

B

3.

A

4.

A

5.

B

6.

A

7.

D

8.

D

9.

C

10.

C

11.

A

12.

C

13.

B

14.

C

15.

B

16.

C

17.

A

18.

A

19.

C

20.

B

21.

D

22.

D

23.

B

24.

A

25.

C




26.

A

27.

A

28.

B

29.

D

30.

B

31.

A

32.

C

33.

B

34.

D

35.

B

36.

D

37.

D

38.

C

39.

D

40.

A

41.

D

42.

C

43.

D

44.

D

45.

A

46.

C

47.

A

48.

C

49.

C

50.

B

51.

C

52.

A

53.

B

54.

A

55.

D

56.

D

57.

D

58.

A

59.

C

60.

B

61.

A

62.

B

63.

A

64.

C

6
5.

D

66.

C

67.

D

68.

D

69.

B

70.

D

71.

D

72.

C

73.

D

74.

C

75.


A