key-practicefinal - 2005 Practice Final Name Read the...

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2005 Practice Final Name ___________________________________ _____________________________________________________________________________ Read the following statements. Circle T for True and F for False. 1 pt each. T F 1) The safety-first strategy for choosing among risky alternatives assumes that the farm manager is most concerned with achieving the highest average return over the long run. T F 2) The main advantage of purchasing used machinery instead of new machinery is a lower initial investment outlay. T F 3) A current ratio of less than 1.0 is preferred by lenders. T F 4) The income statement provides a good measure of the liquidity of the farm business. T F 5) If the average borrowing rate for funds is 9% and the rate of return on equity is 12%, then the rate of return on capital will be higher than 12%. T F 6) If an enterprise is in the solution of an LP, the shadow price will be greater than zero. T F 7) The Balance Sheet can be used to find measures of solvency and liquidity. T F 8) If a capital item is purchased, the entire purchase price is deducted as an expense in the year of purchase. T F 9) Depreciation is usually included in a cash-flow budget. T F 10) Partial budgeting can be used to develop an initial whole-farm plan. T F 11) Cash-flow budgets can be used to plan borrowing and repayment of loans. T F 12) Over the past 50 years, the amount of labor used in agriculture has increased. T F 13) Partial budgets always include every cost associated with an enterprise being considered on a farm. T F 14) If two enterprises are complementary the output of one can only be increased if the output of the other falls. T F 15) If a new tractor is purchased by using cash on hand, the current ratio will not change that day.
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Fill in the blanks. 1 point each. 1) _____capital recovery__________________ is an alternative to using depreciation and interest to find the fixed ownership costs of a machine. 2) __ Cash available for term debt and capital lease coverage ratio measures whether a business is likely to have sufficient debt repayment capacity next year. 3) ___decision tree__________________________ is a diagram that traces out all the possible strategies and outcomes for a particular decision or sequence of related decisions. 4) __useful life__________ is the number of years a capital item will be depreciated. 5) The debt-to-equity ratio measures _solvency________ or the long-term financial strength of the business. 6) The current capital ratio measures __liquidity___________ or the ability of the business to meet short-term cash obligations without disrupting the scope of the business. 7) _whole farm budget__ projects the expected revenue, expenses, and profit from following a particular farm plan. 8)
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key-practicefinal - 2005 Practice Final Name Read the...

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