Question: Use the example Balance Sheet from the Farm Financial Standards Council’s Publication Financial Guidelines for Agricultural Producers. The Text and Appendix are posted on the class home page (Sample Balance Sheet #1) and copies were handed out in

class http://www.aae.wisc.edu/aae320/FarmFinance/BalanceSheetExample.pdf (or the

Appendix http://www.aae.wisc.edu/aae320/FarmFinance/FFSCAppendix.pdf, pages A2-A6). Use these pages to answer the following questions:

1. What was this farm’s current ratio on 12/31/X2? What was it on 12/31/X1? Give a brief intuitive description of the current ratio—What does it mean? What is it used for? Interpret this farm’s current ratio—Are they doing okay or is there a problem?
2. What was this farm’s debt to asset ratio on 12/31/X2? What is this farm’s equity to asset ratio on 12/31/X2? What is this farm’s debt to equity ratio on 12/31/X2? Give a brief intuitive description of each of these ratios—What does it mean? What is it used for? Interpret this farm’s ratios—are they doing okay or is there a problem?
3. On 12/31/X2, how many feeder cattle/steers did the farm have, at what price were they valued, and how much total value were they? What is the total value of these steers if a price of $100.00/cwt were used? How much does this change the current ratio on 12/31/X2?
4. Concerning the farm’s machinery (not vehicles): What was the original cost of all the farm’s machinery purchased over the years? How much depreciation has already been claimed for all of this machinery? What was their total book value (remaining tax basis) on 12/31/X2? What was their total market value on 12/31/X2? Which value (market or cost) does the balance sheet use?
5. How many acres did the farm have on 12/31/X2? When did they buy the land and how much total did they pay for all of it? What was the land worth on 12/31/X2?

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Solution: The downloadable solution consists of 3 pages
Deliverable: Word Document