Question

Income statement and the net worth (balance sheet) statement Net Income Statement Name: Grumpy Farms Year: 2018 $293,328 283,815 577,143 Cash farm income Corn Sales Hog Sales Gross Cash farm income Inventory changes* Corn Total inventory change Gross farm revenue 21.850 21,850 $598,993 $367,800 53.000 Cash farmexpenses Depreciation Total operating expenses Total interest expense Total expenses $420,800 $39.000 $459,800 Net farm income from operations (NFIO) $139,193 Capital Adjustments Machinery (sold tractor) Net Farm Income (NFI) $151,693 $45,000 Note: the unpaid labor and management expense was Net Worth Statement (market value) Name: Grumpy Farms Date: 1/01/2018 Date: 12/31/2018 Beginning Ending Average Assets Current assets Fixed assets S403,500 $1,112.500 $450,340 $1.250,000 $426,920 $1,181,250 Total farm assets $1,516,000 $1,700,340 $1,608,170 Liabilities Current liabilities Intermediate liabilities $195,025 S392.000 $190,230 S385,050 $192,628 $388,525 Total liabilities S587,025 $575,280 $581,153 Net Worth S928,975 S1,125,060 $1,027,018

Answer 1

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Answer 22: 51.1% fair

It means company's assets are financed by owners/shareholders and creditors inthe ratio of 2:1. So there is low risk of liquidity shortage and bankruptcy when the economy is in slowdown. It is calculated as total debt divided by shareholders equity.

Answer 23: 8.3% strong

Generally return on assets of 5% is considered good, so return on assets of 8.3% is strong. It is measured as Net Income divided by total average assets of company. In this case we used NFIO.

Q 24 and Q 25 are repeated.

Answer 26: $12500

capital adjustment is done by selling a tractor which generated the income of $12500 which is why Net Income is greater by $12500 than net farm income from operations.

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