2009 State Farm Management

Non-Math Multiple Choice

3. If the Chicago Board of Trade website indicates today's open for the July corn futures contract was 372'6, what price is this? A. $372.6 per ton B. $372.6 per metric ton C. $3.726 per bushel D. $3.7275 per bushel

• D

7. You are having a good business year and it looks as if taxable income is going to be a lot more than it was last year. Which of the following steps would be the best tax management before the end of the tax year? A. Buy $20,000 of feeders B. Postpone buying the $45,000 tractor until next year C. Buy $15,000 worth of fertilizer for the next crop year D. Sell 5,000 bushels of corn right now E. Put up a $15,000 pole barn this year

• C

9. A farmer who buys feeder pigs could use the options market to reduce his price risk by A. buying a hog Put option. B. selling a hog Put option. C. buying a hog Call option. D. selling a hog Call option. E. All of the above

• A

14. The demand for food is usually considered an inelastic demand. This implies that for a given percentage change in price, A. the percentage change in quantity demanded is less. B. the percentage change in quantity demanded is greater. C. the percentage change in quantity supplied is less. D. the percentage change in quantity supplied is more. E. None of the above

• A

15. The demand for an item with many possible substitutes is _________ than the demand for an item with few substitutes. A. more elastic B. less elastic C. less D. more E. None of the above

• A

16. The rate of return to equity will be highest when A. the interest rate on borrowed funds is less than the rate of return to assets. B. the interest rate on borrowed funds is equal to the rate of return to assets. C. the interest rate on borrowed funds is greater than the rate of return to assets. D. equity is 50% of total assets. E. None of the above

• A

17. Which of the following statements regarding equity is not true? A. Equity = net worth B. Equity = total assets minus total liabilities C. Equity can be less than zero. D. Equity cannot be greater than total assets. E. Equity must always be less than total liabilities.

• E

18. If the supply of a good is inelastic, a 10% change in the price of the good would produce a change in the quantity supplied of A. 10%. B. more than 10%. C. less than 10%. D. 0%. E. None of the above

• C

19. The total consumer demand and producer supply of leechynuts were equal to 1 million nuts when the price was $1 per nut last year. This year the price is $1.25. Which of the following statements is true? A. More than 1 million leechynuts will be supplied. B. Less than 1 million leechynuts will be supplied. C. More than 1 million leechynuts will be demanded. D. Less than 1 million leechynuts will be demanded. E. Not enough information given to determine quantity supplied or demanded.

• E

20. You are driving down a Missouri county road, exercising resonable care, when you run into a stray hog standing on the road. You suffer car damages of $3,500 and the hog (valued at $120) is dead. A. The hog owner is presumed to be negligent. B. You will have to prove the hog owner to have been negligent. C. You will have to pay the hog farmer for his hog. D. You can collect double damages if you can prove the hog owner failed to maintain lawful fences. E. None of the above

• A

23. For income tax purposes, depreciation charges are A. deducted from the total tax liability. B. added to investment credit. C. deducted from operating income. D. deducted from capital sales. E. None of the above

• C

24. The farm return to land, labor, and capital for a year would be found on A. the balance sheet. B. the cash flow budget. C. the income statement. D. a partial budget. E. None of the above

• C

25. Return to management is net cash farm income A. minus debt payments. B. minus the value of unpaid labor, depreciation, interest on equity capital, and net inventory changes. C. minus value of operator's labor and interest on debt payments. D. minus the interest on equity capital, depreciation, and adjustments for inventory changes. E. None of the above

• B

28. Return to operator's labor and management is net farm income A. minus debt payments. B. minus the value of operator's labor, depreciation, interest on equity capital, and debt payments. C. minus the value of operator's labor and interest on debt payments. D. minus the interest on equity capital. E. plus interest paid.

• D

31. The effect of appreciation in an asset's value, such as an increase in land value A. will be accounted for by a larger cash income value in the cash flow statement. B. will be accounted for by smaller added expense figures in the cash flow statement because depreciation would not be subtracted. C. will be accounted for by smaller cash expense value in the cash flow statement. D. is not shown on the cash flow statement.

• D

32. Inflation means A. a dollar will buy more in the future than it will buy today. B. the prices at which the interest rate will equal the inflation ratio. C. a farmer's profit margin will increase over time due to higher prices. D. a dollar will buy less in the future than it will buy today.

• D

34. Corn and grain sorghum are substitutes for each other in many livestock feed rations. Assuming they are substitutes, a decrease in the supply of corn would cause the demand for grain sorghum to A. shift to the left. B. shift to the right. C. decrease. D. remain unchanged.

• B

35. Accrued interest on a balance sheet refers to A. interest that is past due. B. interest that has accumulated since the last loan payment. C. interest on short-term debt. D. interest forgiven by the lender. E. None of the above

• B

36. A livestock producer wishing to use the futures market to hedge the price of cattle he anticipates selling in the future would initially A. buy futures contracts expecting to sell the contracts when he sells his cattle. B. buy futures contracts expecting to buy more contracts when he sells his cattle. C. sell futures contracts expecting to buy them back when he sells his cattle. D. sell futures contracts expecting to sell more contracts when he sells his cattle.

• C

38. Capital used in a farmer's beef breeding herd could be invested in stocks, bonds, land, or some other asset. This illustrates the principal of A. marginal cost. B. fixed cost. C. opportunity cost. D. variable cost. E. alternative cost.

• C

40. In a livestock enterprise budget prepared on July 1, home-grown feed A. should not be included as a cost. B. should be included, valued at its net market price. C. should be included valued at its cost of production. D. should be valued at past year's inventory value

• B

41. The law of supply states that A. as a product price increases, a larger quantity will be consumed. B. as a product price increases, a smaller quantity will be consumed. C. as product price increases, a smaller quantity will be supplied. D. as product price decreases, a smaller quantity will be supplied. E. None of the above

• D

45. The Universal Soil Loss Equation estimates soil erosion in tons per acre per year = R (rainfall factor) x K (soil erodibility factor) x LS (combination of slope percentage and slope length) x C (crop management factor) x P (conservation practice factor). The P factor for contour farming is 0.5. This indicates A. Contour farming causes 0.5 tons of soil loss per acre per year. B. Contour farming increases soil loss by 50% per acre per year. C. Contour farming reduces soil loss by 50% per acre per year. D. Contour farming would have no impact on the Universal Soil Loss Equation estimate. E. Contour farming would reduce yields by 50% per acre per year.

• C

46. A deduction that allows an owner or operator to account for the reduction of a product's reserves is called A. depreciation. B. depletion. C. amortization. D. investment credit. E. None of these

• B

49. Understating the amount of debt on a net worth statement results in A. a smaller net worth figure than should be. B. lower interest costs. C. a smaller debt-to-equity ratio. D. None of the above

• C

50. Which of the following can influence the value of land? A. Its productivity potential B. Location C. Interest rates D. Inflation rates E. All of the above

• E