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FBM
farm business management terms
| Question | Answer |
|---|---|
| The basic storage unit for accounting data used to accumulate amounts from similar transactions; constitutes the core data elements of a financial system | Accounts |
| Claims against the farm or ranch business which have yet to be paid | Accounts Payable |
| Gross income & expenses included in the accounting period in which earned or incurred, regardless of when payment is received. | Accrual Accounting Method |
| Interest owed but not yet paid | Accrued interest |
| The original cost of an asset plus the value of any improvement or alterations less the amount of depreciation, losses, or depletion. Used to calculate depreciation and capital gains; Book value. | Adjusted Basis |
| A person legally vested with the right of administration of an estate. | Administrator/administratrix |
| The process of assigning costs of one segment of the organization to the other responsibility centers in some systematic manner. | Allocations |
| The repayment of a loan and the interest due with a series of equal payments over a specified period of time. | Amortization |
| Also known as interest rate; the percent charged on principal for the use of money. | Annual Percentage Rate |
| The receipt of (or making of) a series of uniform payments over a specified period of time | Annuity |
| An estimate of the fair market value of personal property or real estate by a certified appraiser. | Appraisal |
| Resources controlled by the farm or ranch business | Assets |
| Total units of output divided by the number of units of input | Average Output or Yield |
| Also called a net worth statement. A financial statement with a list of assets, liabilities, owner equity & their relationship to each other at a particular time. | Balance Sheet |
| Also called adjusted basis. The original cost of an asset plus the value of any improvement or alterations less the amount of depreciation, losses, or depletion. Used to calculate depreciation and capital gains. | Basis |
| A downward trend in market prices | Bear Market |
| Person named in an insurance policy to receive proceeds at death of the insured. | Beneficiary |
| An investment analysis ratio equal to the present value of all future benefits of an investment divided by the present value of all future costs | Benefit/Cost Ratio |
| Also called adjusted basis; The original cost of an asset plus the value of any improvement or alterations less the amount of depreciation, losses, or depletion. | Book Value |
| The output required for revenue to equal the total of fixed and variable costs. | Break-Even |
| A schedule of expected returns and costs. | Budget |
| An upward trend in market prices. | Bull Market |
| The right to buy an underlying futures contract or publicly traded stock at a specific price before a certain date. | Call Option |
| Non-human resources used in the production of goods and services. Examples are buildings, machinery, equipment, and cash. | Capital |
| The process of estimating the profitability of an investment, or comparing the profitability of two or more alternative investments. Also called investment analysis. | Capital Budgeting |
| The gain (loss) realized from sale of a capital asset when the asset is sold for more (less) than its adjusted basis. | Capital Gain (Loss) |
| A financial agreement to purchase an asset which in turn may have a value | Capital Lease |
| Process for placing a current value on an asset based on its expected future earning power and the expected interest rate. | Capitalization |
| Cash or access to accounts where cash may be withdrawn within one year. Cash is a capital resource. | Cash |
| All income and expenses, whether received in cash or property, are included in the accounting period they are received | Cash Accounting Method |
| Shows cash received and spent during an accounting period, usually one year. When calculated over several periods, cash flow shows the use and requirements for cash over time. | Cash Flow Statement |
| 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 with family living expenses and tax payments. | Cash Flow Projection |
| Cash available for borrowing or redemption but not the death benefit. | Cash Value of Life Insurance |
| Is used to express a return on farm assets per dollar of total income and defines profit as a percentage of total revenue. | Operating Profit Margin Ratio |
| Shows the percentage return on investment of the business | Return on Assets |
| Compares the total dollars of debt to total dollars of assets. | Debt/Asset Ratio |
| Shows the relationship between owned and borrowed capital. A measure of solvency. | Debt/Equity Ratio |
| Shows the portion of a firm's total assets belonging to the firm's owners | Owner's Equity Ratio |
| Measures the relationship of the farm's net worth (owner equity) to the total farm assets. | Equity/Asset Ratio |
| Determines the ability of the business to meet short-term debt and other obligations from available cash. A measure of liquidity. | Current Ratio |
| Measures liquidity or the relationship between current liabilities and total liabilities. | Debt Structure |
| A measure of the amout of cash available to purchase input, and inventory items after the sale of current farm assets and payment of all current farm liabilities. | Working Capital |
| Represents the interest rate being earned in the farm business. | Return on Equity |
| Interest that has accumulated since the last loan payment. | Accrued interest on a balance sheet |
| Return to unpaid family and operator labor, management and equity capital | Net Farm Income |
| Shows the physical and financial plan for the entire farm or ranch business for a specific period of time. It is the total of all production processes. | Whole Farm Budget |
| Costs of the fixed and variable inputs needed to obtain output | Cost of Production |
| Cost which change directly with the level of production. (Also called operating costs. | Variable Costs |
| Shows projected costs and returns associated with some change in the farm business | Partial Budgeting |
| Shows the projected costs and returns associated with one production process, usually for one production period. | Enterprise Budget |
| Costs incurred by the farm that do not vary with the level of production | Fixed Costs |
| A specific process or activity producing a single output | Enterprise |
| A schedule of expected returns and costs | Budget |
| Invest money where it will earn the highest returns. If you have limited resources, use each unit of a resource where it will give the greatest returns. | Principle of Equi-Marginal Return |
| The output required for revenue to equal the total of fixed and variable costs. | Break-Even |
| A written agreement that specifies that a certain commodity will be delivered at a particular location at a future time for an exact price | Forward Contract |
| 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 |
| The quantity of the good which consumers willing to purchase at alternative prices in a given period of time. | Demand |
| The amount of commodities or services that would be offered for sale by a producer in a specific market at a given series of prices during a specific time period. | Supply |
| Usefulness of a commodity as measured by its ability to satisfy human wants and needs | Utility |
| A business organization that is structured as a corporation and that qualifies as a corporation for all purposes except taxation | Subchapter S Corporation |
| A business entity created when two or more persons join together to conduct a business and to share in its profits and losses. | Partnership |
| A business where an individual owns, manages. assumes all the risk, and derives all the profits from a business. | Sole Proprietorship |
| A legal entity that can own property and conduct business. The entity is separate and distinct from its owners and managers. Shareholders own the business. Officers manage the business. | Corporation |
| 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. | Limited Liability Corporation (LLC) |
| All assets controlled by the farm or ranch business having a life greater than one year. | Non-current Asset |
| Total assets minus total liabilities. Also called owner equity | Net Worth |
| A financial statement that lists the cash and non-cash receipts and expences of a firm or individual during a specified period of time, usually one year. Also called profit-loss statement or operating statement. | Income Statement |
| The comparison of expected results from different actions, approaches, or enterprises during the same period. | Comparative Analysis |
| A financial statement with a list of assets, liabilities, owner equity and their relationship to each other at a particular time, usually at end of the accounting period. It is the picture of business on a particular date. Also called balance sheet. | Net Worth Statement |
| Cash, marketable securities, accounts and notes receivable, prepaid expenses, and inventories, which are expected to be converted to cash within one year. | Current Assets |
| The amount of net income that has accumulated in a farm or ranch business since it began. | Retained Earnings |
| The ratio that shows how much of farm income is used to pay for borrowed capital | Interest-expense ratio |
| In futures contract trading, gives the owner the right to buy or sell a futures contract for a certain price, called the strike price, for a limited period of time. | Options |
| In futures contract trading, the difference between the local cash market price and the price of the near term (expiring) futures contract | Marketing Basis |
| 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 | Marketing |
| 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. | Futures Contract |
| 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. | Compounding |
| A calculation used to determine the current or present value of a cost or receipt expected in the future. Adjusts for the time value of money. | Discounting |
| Percent charged on principal for the use of money. Always expressed as an annual rate. | Interest Rate |
| The process of estimating the profitability of an investment, or comparing the profitability of two or more alternative investments. Also called capital budgeting. | Investment Analysis |
| The value, at this point in time, of income to be received at some time in the future. | Present Value |
Created by:
bcraighead
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