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Exam 1 (ch. 2-5)
N/A
32
Accounting
Undergraduate 3
09/29/2013

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Cards

Term
4 general business strategies
Definition
Low volume, hi value producers
Hi volume, low margin producers
specialty product/service providers
part time operators
Term
factors that affect current mgmt
Definition
consumer's changing needs=producers must have it all! niche mkts are more important
information changes
job appeal outside of the farm
technology
environmental and health concerns
Term
Functions of MGMT
Definition
planning
implementation
control
Term
planning
Definition
choose course of action
-Establish goals
-ID and allocate resources
Term
Implementation
Definition
Set plan in motion
-Manager must acquire resources
-Supervise process
Term
Control
Definition
"feedback" function
-collect and analyze data
-corrective action
Term
Factors affecting the decision-making environment
Definition
Fixed supply of land
biological processes/weather
small size (staff-wise)
Perfect Competetion? (producers are price takers)
Term
Why are records important
Definition
assess financial condition
assist in obtaining loans
measure profitability
assist in analysis of new investments
prep. income tax returns
Term
Farm business activities
Definition
production
investment
financing
**Keep records of these**
Term
Production activity
Definition
involve activities related to production of crops and livestock (revenue and expenses included)
Term
Investment activity
Definition
relate to purchase, depreciation, and sale of long-lived assets
Term
Financing
Definition
relate to borrowing money and paying interest and principal on loans
Term
Accrued Expense
Definition
An expense that must be taken into account beyond an operations' fiscal year
Term
Money owed (5 terms)
Definition
Account payable
Debt
Expense
Liability
*Credit
Term
Money people owe you or money you have (
Definition
Account payable
asset (if liquid)
*Credit
inventory (if liquid)
Owner equity
Term
Owner Equity
Definition
the money you have after all
liabilities are paid off and all assets are sold
determined by adding:
-capital contributed by owner
-retained earnings
-when mkt values change (how in-demand are your products??)
Term
Liquidity
Definition
measure of how quickly a business can turn its assets into cash
business is more liquid if it can do this and make more money than another (bc the term is relative)
USE CURRENT RATIO
Term
Solvency
Definition
measures relations among assets, liabilities, and equity
-Use debt/asset ratio
-equity/asset ratio
-debt/equity ratio
Term
What is on balance sheet?
Definition
-owner equity
-liquidity
-solvency
-net capital ratio
-debt structure ratio
Term
Why balance sheet?
Definition
-"snapshot" of how business is doing
-How am I doing today?
-can be complete at any time
-helps get loans
Term
Why Income Statement?
Definition
-"film" of business over time
-How much will I make?
-summarizes effects of transactions over time
Term
Income statements and balance sheets come from....
Definition
Accounting systems
Term
2 types of accounting systems
Definition
Cash (only recorded when cash is recieved)
Accrual(recorded at time of production)
Neither give complete picture, but complement each other
Term
Income Statement includes...
Definition
ROA, ROE, Operating profit margin ratio, return to labor and mgmt
Term
Depreciation
Definition
annual loss in value of durable assets
Term
when to use straight line depreciation
Definition
when annual depreciation will be the same every year
Term
current vs. noncurrent assets
Definition
current=liquid
noncurrent=everything else, more difficult to sell
Term
current vs. noncurrent liabilities
Definition
current: due w/in the current fiscal year
noncurrent: due sometime beyond current fiscal year
Term
Decision making process
Definition
Define the mission of the business
Formulate the goals for the farm and family
Assess the resources available to the business (internal scanning)
Survey the world surrounding the business (external scanning)
Identify and select appropriate strategies
Implement and refine the selected strategies
Term
structure of balance sheet
Definition
Assets shown on left or top
Liabilities are shown on right or below assets
Term
basic accounting equation
what is it an where is it fount?
Definition
found on balance sheet
Assets+liabilities= owner's equity
Term
structure of income statement
Definition
depends on whether you are using cash vs. accrual
basically, revenue-expenses=net farm income (over a period of time, projected income)
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