March 6, 2008
Name:KEYParticipant #:
2008
North Carolina FFA
Farm Business Management- JUNIOR DIVISION
Career Development Event
Section I: Multiple Choice (100 points)
There are 20 questions on this section of the event. Please check carefully to see that you have five pages including this cover page.
Read each question carefully. Circle the letter for the one best answer. Each question is worth five (5) points. You have 30 minutes to complete this section of the event.
prepared by
Department of Agricultural and Resource Economics
College of Agriculture and Life Sciences
North CarolinaStateUniversity
NCSU Box 8109
Raleigh, North Carolina27695
919. 515-4544
in cooperation with
Department of Agricultural and Extension Education
College of Agriculture and Life Sciences
North CarolinaStateUniversity
sponsored by
Southern States Cooperative, Inc.
1. In owning, operating, and managing a farm business, a systematic approach to decision-making is important because it helps to better achieve outcomes more closely related to goals. Goals are
A. broad statements that show where you want to be after some period of time.
B. specific steps that must be taken to get things done.
C. big picture things that you are never likely to achieve—but give you something to shoot for.
D. where you want to be after a period of time and they should change every five years.
2. The steps in a systematic decision-making process are best described by which of the statements below.
A. gather information and make a decision quickly.
B. gather information, analyze information, and make decisions.
C. aim, fire, ready.
D. define the problem, gather information, list and evaluate solutions, make decisions, take action, and evaluate.
3. Two good reasons for keeping farm business records are
A. to maximize profit and minimize taxes for the farm business.
B. to comply with income tax reporting requirements and to assist in planning and management.
C. to know when the farm business is making money and when it is losing money.
D. to know which farm enterprises are making money and which ones are losing money.
4. Two methods of putting a dollar value on farm business inventories are
A. book value and current value.
B. current value and market value.
C. tax value and market value.
D. real value and estimated value.
5. A farm business has cash inflows and cash outflows. Cash receipts are funds flowing IN. They inlcde all of the following EXCEPT
A. business income.
B. accounts receivables paid.
C. family living expenses.
D. money borrowed.
6. Inventories must be completed in order to maintain accurate records of assets and liabilities. In addition, it is necessary to know what a farm business has in the beginning to evaluate your progress. Calculate the value of the following inventory item (round your answer to the nearest dollar).
10 acres of growing wheat with expenses to date of:
15 bushels of seed wheat at $4.75 per bushel
$250 in fertilizer
$100 in equipment rental
A. $350
B. $355
C. $365
D. $421
7. The three parts of a net worth statement are:
A. assets, liabilities, and net worth
B. revenues, expenses, and net farm income
C. revenues, expenses, and net profit
D. receivables, payables, and net margin
8. Three financial indicators that can be calculated from the net worth statements are liquidity, solvency, and equity. Liquidity is the:
A. ability of all assets, if sold at market value, to cover all debts
B. ability of a business to generate enough cash to pay bills without disrupting business.
C.amount of water required to operate a farm business for one year.
D. amount cash received by farm business in a one year period.
9. An income statement is used to:
A. show the farm business’ financial situation at a given point in time.
B. show the cash inflows (dollars available) and cash outflows (dollars used) of the farm business for the past year.
C. record the dollars flowing IN and OUT of the farm business.
D. analyze the profitability of the farm business.
10. The four factors of production are:
A. cash inflows, assets, rent payments received, and profits
B. seed, feed, fertilizer, and chemicals
C. land, labor, capital, and management
D. records, budgets, financial statements, and income tax returns.
11. For a farm business, enterprise budgetsuse projected costs and returns associated with one production process for one production period. The production component of an enterprise budget uses estimates of prices and yields to calculate the total value of production. The cost component of an enterprise budget uses what two categories of costs?
A. total costs and partial costs
B. fixed costs and variable costs
C. additional costs and reduced costs
D. input costs and output costs
12.Partial budgets are projected costs and returns associated with some change in the farm business operation. A partial budget can be useful when the farm business owner or manager is making a decision about
A. expanding an enterprise operating in the farm business.
B. selling the whole farm business.
C. the enterprise in the farm business that is the most profitable.
D. the breakeven price and yield for a crop.
13. The opportunity cost of one more unit of a variable input (like a pound of fertilizer) is the
A. return from using the one pound of fertilizer in its next best use.
B. market value of the pound of fertilizer at the time of its use.
C. cost of the pound of fertilizer at the time of purchase.
D. same as the marginal cost of the pound of fertilizer.
14. In a farm-level situation where a farmer is producing a product to which some value has been added and the farmer can now have some ability to ask for and receive a higher price when selling the product in the marketplace is said to be
A. a price maker.
B. a price taker.
C. profit neutral.
D. price neutral.
15. A market that consists of many buyers and many sellers trading a uniform commodity such as corn, soybeans, or wheat is called
A. a monopoly.
B. pure competition.
C. an oligopoly.
D. risk-free.
16. A demand curve shows the relationship between quantity purchased and
A. quality
B. supply
C. income
D. price
17. Futures markets is one way to forward price commodities produced by a farm business. A futures contract createsthe obligation to make and take delivery ofa specific
A. quantity of a commodity at a specified time in the future.
B. quality of a commodity at a specified time in the future.
C. quantity and quality of a commodity at any time in the future.
D. quantity and quality of a commodity at a specified time in the future.
18. The price of beef is determined by the supply of beef and the demand for beef. A change in price occurs when the demand for beef increases or decreases even thought he supply remains constant. Which of the following causes a change in demand for beef?
A. decrease in the number of cattle
B. increase in the number of beef cattle producers
C. increase in the cost of producing beef
D. increase in the income of beef consumers
19. Marketing is
A. the same as selling.
B. all the economic activities involved in preparing and positioning the product for the final customer.
C. is an activity that farm businesses do not have to complete because marketing is left to other persons and companies after the product leaves the “farm gate.”
D. is about determining the equilibrium price in the marketplace.
20. In farm business management, production enterprises require investments in time and money. In addition, farm business owners must invest in land, labor, machinery, and equipment. A goal for every farm business is profit. Therefore, investments must provideprofitable returns for the overall business to be profitable. Managers must possess an understanding of investment analysis so that they choose appropriate investment opportunities and avoid costly investments. Compounding is used to calculate the future value of a present sum of money. Discounting is used to calculate the present value of a future sum of money.
To use compounding and discounting methods of investment analysis, the farm business manager must choose an appropriate percentage rate of return to use in calculations. This percentage rate of returnis
A. your opportunity cost of capital
B. the rate of return you could earn with your best alternative use of the money
C. the highest rate of return that you could earn if you invested the money in something else
D. all of the above
End of the multiple choice section of the 2008 NC FBM Junior CDE
North Carolina FFA Farm Business Management JUNIOR DIVISION CDE – 2008KEY page 1