Financial Management onCatfish Farms
1
OVERVIEW OF INTENSIVE TRAINING MODULE:
Financial Management on Catfish Farms to Improve Efficiencies and Profitability
Carole R. EngleAquaculture/Fisheries CenterUniversity of Arkansas at Pine Bluff
SHORT & LONG-TERMFINANCIAL DECISIONS:Can it generate enough value
over time to pay off the debts (solvency)? Balance Sheets
Is it profitable in the long run?Is it profitable in the short run?Can it generate enough cash
when needed to pay the bills (liquid)?
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Financial Analysis: Key Statements
Financial Position Balance Sheet
Profitability Budgets Income Statement
Cash Flow/Liquidity Cash Flow Statement
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These need to be veryspecific,
Need to be based onthorough financial analysis of business.
What are your business goals
for 2011?
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WHAT DOES IT TAKE TOSURVIVE THE LONG RUN?Adequate financial strength:
-Is my financial positionstrong enough?
-Do I have too much debt to pull out of this?ADEQUATE FINANCIAL STRENGTHDETERMINED FROM THE BALANCE
SHEETEngle, UAPB
ADEQUATE PROFITABILITY
Enterprise budgets can beused to evaluate new
management strategies to see what the effect on profitability might be.
Income Statements measure profits & losses in a specific
year.Engle, UAPB
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WHAT DOES IT TAKE TOSURVIVE THE SHORT RUN?
•Must be able to sell fish at aprice that covers its variable costs, not necessarily all itstotal costs.
•Must have adequate liquidity.•Enough cash revenue to makepayments when due.
•Must have adequate cash flow.
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• Extensive planning.• Controlling: implementing
actions needed to meet goals.• Monthly monitoring ofCash flow statement -Deviations apparent.Corrective actions can be taken more quickly.
Essential Financial Management
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Balance Sheets: a Management Tool to Improve
Financial Position of the Business
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Carole R. EngleAquaculture/Fisheries CenterU. of Arkansas at Pine Bluff
Financial Analysis: Key Statements
Financial Position Balance Sheet
Profitability Budgets Income Statement
Cash Flow/Liquidity Cash Flow Statement
Engle, UAPB
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Short & long-term financial decisions:
• Can it generate enough value over time to pay off the debts (solvency)?– Balance Sheets
• Is it profitable in the long run?• Is it profitable in the short run?• Can it generate enough cash
when needed to pay the bills (liquid)?
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Balance Sheets:
Financial statement that measures
Financial Positionof the business.
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Balance Sheet:What is its bottom
line?
Net Worth!!
Same as Owner Equity!!
What is your business worth?
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Balance Sheet:Structure
Divided into:•Assets
–What is “owned”–Land, buildings–Equipment–Fish in ponds
•Liabilities–What is “owed”–Debts, loans, bills due at supply store.
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Balance Sheet:How is it organized?
Assets divided into:•Current
–Cash–Items to be sold this year
•Non-current–Items used in production–Equipment–Ponds
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Balance Sheet:Organization
Liabilities divided into•Current
–Bills due this year–Payments due this year
•Non-current–Payments due after this year, over next several years
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Balance Sheet for 256-acre Catfish Farm, December 31.
AssetsCurrent Assets
Checking account $15,849
Value of small fish in ponds $266,112
Non-current AssetsEquipment $387,570
Total Assets $1,003,890
Not all assets listed here – not enough room; Check the other training file for a complete balance sheet!
Not all assets listed here – not enough room; Check the other training file for a complete balance sheet!
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Balance Sheet for 256-acre Catfish Farm, December 31.
Liabilities
Current Liabilities
Payment due this year onequipment loan
$72,368
Payment due this year onpond construction loan
$38,216
Non-current Liabilities
Principal remaining onequipment loan
$168,858
Total Liabilities $534,214
Not all liabilities listed here – not enough room;Check other training files for more!
Not all liabilities listed here – not enough room;Check other training files for more!
Engle, UAPB
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Balance Sheet for 256-acre Catfish Farm, December 31.
Total Assets $1,285,851
Total Liabilities - $534,214Net Worth = $751,637
•Net worth is positive.•Business is solvent.•If business were to be sold, areenough assets to pay off claims(liabilities)
•Over time, Net Worth shouldgrow, wealth grows.
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Financial Efficiency: Solvency
•Refers to the value of assets
owned by the business
compared to the amount of
liabilities owed.
•Indicates whether, if the
business were to be sold, if
there would be enough
capital to pay off the debts. Engle, UAPB
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Financial Ratios that Measure SolvencyRatio Interpretation
Change in net worth
Positive change shows business growth
Debt/asset ratio
Compares value of debt to assets. Smaller values better. Less than 1 meanssolvency.
Equity/asset ratio
Part of total assets financed by owner’s equity. Higher values preferred.
Debt/equityratio
Compares proportion of financing by lenders with that from owner. Lower values preferred.
Debt structure ratio
Compares amount of debt due this year to total debt.
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Solvency Measures for the256-acre Catfish Farm
Ratio ValueChange in net worth - $245,994
Debt/asset ratio 0.42
Equity/asset ratio 0.58
Debt/equity ratio 0.71
Debt structure ratio 0.21
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Financial Efficiency: Liquidity
• Liquidity is the ability of a business to meet cash flow obligations.
• It is important to keep financial transactions of the business running smoothly.
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Financial Ratios that Measure Liquidity
Ratio InterpretationCurrent ratio Quick indicator. The higher the value the
more liquid.
Workingcapital
Difference between current assets and current liabilities. In dollar values instead of a ratio.
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Liquidity Measures for the256-acre Catfish Farm
Ratio ValueCurrent ratio 2.55
Working capital $171,377
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How Are These Calculated?
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Spreadsheet Tutorialsare Available on this site in another file.
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• Exercise balance sheet, income statement, cash flow budgets
• Correct versions, the financial ratios, and
• A brief interpretation of each ratio and how to improve.
Tutorials include:
Carole R. EngleAquaculture/Fisheries Center
University of Arkansas at Pine Bluff
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One use of a balance sheet is toanswer the question of:
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Assets-current
277,287
Non-current 475,213Total 752,500Liabilities-current
242,168
Non-current 179,079
Total 421,247
Net Worth
Debt/asset
Year 1
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Assets-current
277,287
Non-current 475,213Total 752,500Liabilities-current
242,168
Non-current 179,079
Total 421,247
Net Worth 331,253
Debt/asset 0.56
Year 1
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Assets-current
277,287 217,868
Non-current 475,213Total 752,500Liabilities-current
242,168
Non-current 179,079
Total 421,247
Net Worth 331,253
Debt/asset 0.56
Year 1 Year 2
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Assets-current
277,287 217,868
Non-current 475,213 356,410Total 752,500Liabilities-current
242,168
Non-current 179,079
Total 421,247
Net Worth 331,253
Debt/asset 0.56
Year 1 Year 2
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Assets-current
277,287 217,868
Non-current 475,213 356,410Total 752,500 574,278Liabilities-current
242,168
Non-current 179,079
Total 421,247
Net Worth 331,253
Debt/asset 0.56
Year 1 Year 2
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Assets-current
277,287 217,868
Non-current 475,213 356,410Total 752,500 574,278Liabilities-current
242,168 411,686
Non-current 179,079 179,079
Total 421,247
Net Worth 331,253
Debt/asset 0.56
Year 1 Year 2
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Assets-current
277,287 217,868
Non-current 475,213 356,410Total 752,500 574,278Liabilities-current
242,168 411,686
Non-current 179,079 179,079
Total 421,247 590,765
Net Worth 331,253
Debt/asset 0.56
Year 1 Year 2
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Assets-current
277,287 217,868
Non-current 475,213 356,410Total 752,500 574,278Liabilities-current
242,168 411,686
Non-current 179,079 179,079
Total 421,247 590,765
Net Worth 331,253 -16,487
Debt/asset 0.56 1.03
Year 1 Year 2
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Catfish inventory= can affect balance sheet,net worth, and financial ratios.
Pond inventory estimation not precise. Depletion method. Feeding response alone does not work well. Very careful monitoring of all stocking,
feeding, & harvesting with continuousanalysis can get close.
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Experimental Trials: depletion estimates by weight were within 0-8% of actual and from 3.5-18% by number.
Commercial Pond Trials (19 ponds): 1-14% by weight and 0.3-2.4% by number (only 2 ponds estimated number).
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Evaluation of Trawl for Sampling &Inventory Estimation in Catfish Ponds
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The TrawlThe Trawl
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Assets-current
181,000
Non-current 1,643,855Total 1,824,855Liabilities-current
159,725
Non-current 1,068,506
Total 1,228,231
Net Worth 596,624
Year 1431-acre CatfishFarm
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Current ratio 1.13
Working Capital 21,275Equity/asset ratio 0.33Debt/asset ratio 0.67
Debt/equity ratio 2.06
Debt structure 0.13
Year 1431-acre CatfishFarm
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Assets-current
181,000 362,000
Non-current 1,643,855 3,588,710
Total 1,824,855 3,950,710
Liabilities-current
159,725 221,552
Non-current 1,068,506 1,369,506
Total 1,228,231 1,591,058
Net Worth 596,624 239,652
Year 1862-acre MergedCatfishFarm
Year 2
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Current ratio 1.13 1.63
Working Capital
21,275 140,448
Equity/asset ratio
0.33 0.60
Debt/asset ratio
0.67 0.40
Debt/equity ratio
2.06 0.67
Debt structure
0.13 0.14
Year 1862-acre MergedCatfishFarm
Year 2
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Income Statement
Carole R. EngleAquaculture/Fisheries Center
U. of Arkansas at Pine Bluff
Engle, UAPB
Short & long-term financial decisions:
• Can it generate enough value over time to pay off the debts (solvency)?– Balance Sheets
• Is it profitable in the long run?• Is it profitable in the short run?• Can it generate enough cash
when needed to pay the bills (liquid)?
Engle, UAPB
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Profitability Measures• Profitability = Total revenues -
total costs
• A business that is both solvent and liquid will not necessarily be profitable.
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Financial Analysis: Key Statements
Financial Position Balance Sheet
Profitability Budgets Income Statement
Cash Flow/Liquidity Cash Flow Statement
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Income Statement (P&L)Profit & Loss Statement
Bottom line = Net Farm Income
• Budget units can be a pond• P & L for entire farm
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Income Statement:How is it structured?
Item ValueRevenue $806,400
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Income Statement:How is it structured?
Item ValueRevenue $806,400Cash expenses $610,322
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Income Statement:How is it structured?
Item ValueRevenue $806,400Cash expenses $610,322Depreciation $42,707
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Income Statement:How is it structured?
Item ValueRevenue $806,400Cash expenses $610,322Depreciation $42,707Total operating expenses
$653,029
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Income Statement:How is it structured?
Item ValueRevenue $806,400Cash expenses $610,322Depreciation $42,707Total operating expenses
$653,029
Cash interest paid $150,579
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Income Statement:How is it structured?
Item ValueRevenue $806,400Cash expenses $610,322Depreciation $42,707Total operating expenses
$653,029
Cash interest paid $150,579Total expenses $803,608
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Income Statement:How is it structured?
Item ValueRevenue $806,400Cash expenses $610,322Depreciation $42,707Total operating expenses $653,029Cash interest paid $150,579Total expenses $803,608Net farm income from operations
$2,792
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Profitability Measures• Primary measure of farm profitability is :
Net Farm Income
• Net Farm Income is a measure of the return to operator’s equity, capital, unpaid labor, and management.
• Net Farm Income can be distributed among the four principal factors of production: land, labor, capital, and management
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Gross Revenue “Pie”
NFI to operator forunpaid labor, equity
capital, & management
Interest to lenders for borrowed
money
Payments to suppliers for feed, seed,
etc.
Rent to owner for rented land
Employeewages
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Financial Indicators of How Much of Net Farm Income is Earned by Each
Factor of Production
Ratio Interpretation
Return to labor & management
Residual return to owner for labor & management input
Return to labor Portion of NFI remaining after subtracting out opportunity costs of capital & management
Return to management
NFI remaining after subtracting costs of capital and labor
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Financial Indicators of How Much of Net Farm Income is Earned by Each
Factor of Production
Ratio Interpretation
Rate of Returnto Assets
Can be compared to rates of return from other investments. Independent of financing.
Rate of Return on Farm Equity
Measures percent return to owner’s net worth or equity.
Operating Profit Margin Ratio (OPMR)
Measures the proportion of gross revenues left after paying expenses
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Financial Indicators from Income Statement for the 256-acre Catfish Farm
Ratio ValueReturn to labor & management $24,786
Return to labor $14,616
Return to management $10,140
ROA 10%
ROE -2%
OPMR 16%
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Spreadsheet Tutorialsare Available on this site in another file.
Engle, UAPB
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Using Enterprise Budgets and Income Statements to Improve Efficiencies and Profitability of Catfish Farms
Carole R. EngleAquaculture/Fisheries Center
University of Arkansas at Pine Bluff
Income Statement:Cash-based Accounting
Item ValueRevenue $403,200Cash expenses $610,322Depreciation $42,707Total operating expenses $653,029Cash interest paid $150,579Total expenses $803,608Net farm income from operations
- $400,408
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Income Statement:Cash-based Accounting
Item 2010 2011
Revenue $403,200 $1,209,600
Cash expenses $610,322 $610,322
Depreciation $42,707 $42,707
Total operating expenses
$653,029 $653,029
Cash interest paid $150,579 $150,579
Total expenses $803,608 $803,608
Net farm income - $400,408 $405,992
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Income Statement:Accrual-based Accounting
Item 2010 2011
Revenue $403,200 $1,209,600
Change in fish inventory $403,200 - $403,200
Total Farm Revenue $806,400 $806,400
Total operating expenses $653,029 $653,029
Cash interest paid $150,579 $150,579
Total expenses $803,608 $803,608
Net farm income $2,792 $2,792
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What does it take to survive the short run?
•Must be able to sell fish at aprice that covers its variable costs, not necessarily all itstotal costs.
•Must have adequate liquidity.•Enough cash revenue to makepayments when due.
•Must have adequate cash flow.
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Fish Feed Prices
$150
$200
$250
$300
$350
$400
$450
$/t
on
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Realities of $300/ton FeedUAPB Base Budgets:
431-acre farm ($300/ton feed)
Farm Size Cost/VC
Cost/ TC
131-acre farm $0.63/lb $0.83/lb256-acre farm $0.64/lb $0.79/lb431-acre farm $0.64/lb $0.78/lb1,007-acre farm $0.64/lb $0.78/lb
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Realities of $350/ton FeedUAPB Base Budgets:
431-acre farm ($350/ton feed)
Farm Size Cost/VC
Cost/ TC
131-acre farm $0.69/lb $0.88/lb256-acre farm $0.70/lb $0.85/lb431-acre farm $0.70/lb $0.84/lb1,007-acre farm $0.70/lb $0.83/lb
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Breakeven Prices (based on budgets for 256-acre farm; $300/ton)
Above total cost $0.79
Above variable cost $0.64
Above cash costs (no debt capital)
$0.60
Above cash costs (100% debt op. capital)
$0.65
Above cash costs (50% debt long-term, no land; 100% debt op. capital)
$0.70
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What would happen with different feed and catfish
prices?
To maximize profits:
At low fish prices, feed rates and stocking rates would decrease.At low feed prices, feed and
stocking rates would increase.At high feed prices, feed and
stocking rates would decrease.Engle, UAPB
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Effects of Higher Fish Prices & Higher Feed Prices
Higher feed prices$$$ Lower stocking & feeding
Higher fish prices$$$ Higher stocking & feeding
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Profit-maximizing stocking densities at different fish &
feed prices.
01,0002,0003,0004,0005,0006,0007,0008,0009,000
fis
h/a
cre
$/ton
$0.70/lb $0.75/lb $0.80/lb
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How low should you go?
Model results dropped profit-maximizing stocking rates to 5,000/ac at $0.60/lb.
Farmers need to stock at rates that ensure financial payments are met.
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Fish grow faster at lower densities.
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Higher stocking rates produce higher yields of smaller fish.
May June July August Sept. Oct.
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Difficult to get good growth,
turnover
Densities need to stay within a feasible range.
5,500/acre
7,500/acre
Difficult to make debt payments on
ponds
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With High Feed Prices,
Essential to get as much gain out of every pound
of feed as possible.
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Feed Prices, Economics, & Profitability:
Feed Studies
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Breakeven prices across farm sizes, 2009 feed costs.
Farm size 32% protein ($343/ton)
28% protein ($322/ton)
BEP/VC BEP/TC BEP/VC BEP/TC
60-acre $0.67 $0.89 $0.65 $0.87
131-acre $0.68 $0.88 $0.66 $0.86
256-acre $0.69 $0.84 $0.67 $0.82
431-acre $0.69 $0.83 $0.67 $0.81
1,007-acre $0.69 $0.83 $0.67 $0.81
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Breakeven prices across farm sizes, 2009 feed costs.
Farm size 32% protein ($343/ton)
28% protein ($322/ton)
BEP/VC BEP/TC BEP/VC BEP/TC
60-acre $0.67 $0.89 $0.65 $0.87
131-acre $0.68 $0.88 $0.66 $0.86
256-acre $0.69 $0.84 $0.67 $0.82
431-acre $0.69 $0.83 $0.67 $0.81
1,007-acre $0.69 $0.83 $0.67 $0.81
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What About Every Other Day Feeding?
UAPB study: Yield of carryover fish was 757
lb/ac less when fed every otherday.
Feed fed was 4,778 lb/ac less.
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What About Every Other Day Feeding?
Feedcost
Net benefit
($0.65/lb)
Net benefit
($0.70/lb)
NetBenefit
($0.75/lb)$250/ton $106/ac $68/ac $30/ac$275/ton $165/ac $127/ac $89/ac$300/ton $225/ac $187/ac $149/ac$325/ton $285/ac $247/ac $209/ac$350/ton $344/ac $306/ac $268/ac
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What’s the Down Side to Every Other Day Feeding?
Understocked fish growvery poorly.
Every other day feedingbetter strategy for pondswith fish that are closer tomarket size.
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How do I look at my costs?
• Use the budget spreadsheets included in the training materials.
• Need to have EXCEL installed on your computer.
• Substitute your costs in and see the change in the breakeven costs and net returns.
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THERE ARE EXERCISES AVAILABLE ON THIS SITE IF
YOU WISH TO PRACTICE WHAT YOU HAVE LEARNED
ABOUT INCOME STATEMENTS BEFORE
MOVING ON TO THE LAST SEGMENT IN THIS MODULE.
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Using Cash Flow Budgets to Improve
Cash Flow & Liquidity in the Catfish Business
Carole R. EngleAquaculture/Fisheries CenterU. of Arkansas at Pine Bluff
46
Overview of Structure and Interpretation of Cash Flow Budgets
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Short & long-term financial decisions:
• Can it generate enough value over time to pay off the debts (solvency)?– Balance Sheets
• Is it profitable in the long run?• Is it profitable in the short run?• Can it generate enough cash
when needed to pay the bills (liquid)?
Engle, UAPB
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Financial Analysis: Key Statements
Financial Position Balance Sheet
Profitability Budgets Income Statement
Cash Flow/Liquidity Cash Flow Statement
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Cash Flow Analysis: What Can It Be Used For?
• Use it to develop a plan for adverse conditions.
• Plan should consider budgeting enough to be able to feed to obtain adequate yields.
• Consider looking hard at fixed costs as way to reduce overall costs.
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Cash Flow Analysis: What Can It Be Used For?
• Whether there is a liquidity problem• Whether there is a cash shortfall in
particular months.• Whether the business can make its
payments on time.• What the cash position of the
business is.• If the operating line of credit is
adequate or not
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Cash Flow Analysis:What is the unit of analysis?
• Entire farm
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Cash Flow Analysis:How Can It Help?
• Analyze pattern of cash flow• Structure operating line of credit• Credit & loan applications• Decide on best timing for capital
purchases (equipment, land, etc.)• Look to improve timing of
purchases of supplies, inputs
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Cash Flow Analysis: StructureItem January February
Total cash inflow $611,090 $628,406
Total cash outflow $14,940 $50,848
Cash available $596,150 $577,548
New borrowing 0 0
Ending cash balance $596,150 $577,548
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Cash Flow Analysis: SructureItem January February
Beginning cash $578,834 $596,150
Total cash outflow $14,940 $50,848
Cash available $596,150 $577,548
New borrowing 0 0
Ending cash balance $596,150 $577,548
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Cash Flow Analysis:Total Cash Inflow
Item January February
Beginning cash $578,834 $596,150
Receipts from catfish sold
$32,256 $32,256
Total cash inflow $611,090 $628,406
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Cash Flow Analysis:Operating cash expenses
Item January February
Feed $2,783 $5,565
Fingerlings 0 $36,416
….. ….. …..
Total operating expenses
$14,940 $50,848
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Cash Flow Analysis: Debt ServicingItem January February
Real estate loan
Principal 0 0Interest 0 0
Equipment
Principal 0 0Interest 0 0
Operating loan
Principal 0 0Interest 0 0
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Cash Flow Analysis:Summary of Debt Outstanding
Item January February
Real estate 0 0
Equipment 0 0
Operating 0 0
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Cash Flow Analysis with 50% of catfish off-flavor and 30% financed.
Item July August
Total cash inflow $63,387 $50,320
Total cash outflow
$80,239 $99,766
Cash available - $16,852 - $49,446
New borrowing $26,852 $59,446
Ending cash balance
$10,000 $10,000
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Cash Flow Analysis:Summary of Debt Outstanding
Item July August
Real estate 0 0
Equipment 0 0
Operating $103,259 $145,340
Payments are made on operating line of credit in each of these months because there is a lien on the fish sold.
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Liquidity Measures for 256-acre Catfish Farm
Ratio Interpretation
InterestCoverage Ratio
Relates interest to firm’s ability to service debt. How much of firm’s returns to assets available per dollar of interest. Higher ratios more favorable.
Cash Flow Coverage Ratio
Extent that excess cash provides cushion for covering debt-servicing. Higher ratios more favorable.
Debt-servicingratio
Cash required for interest and principalpayments. Lower ratios show lower debt burden.
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Measures of Cash Flow Risk for 256-acre Catfish Farm
Cash flow risk measure
Percent farm revenue can decline and still meet cash flows
Percent farm expenses can increase and still meet cash flows
Percent interest rates can increase and still meet cash flows
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Liquidity Measures for 256-acre Catfish Farm
Ratio Value
Interest Coverage Ratio 0.14
Cash Flow Coverage Ratio 5.63
Debt-servicing ratio 0.18
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Measures of Cash Flow Risk for 256-acre Catfish Farm
Cash flow risk measure Value
Percent farm revenue can decline and still meet cash flows
0.45
Percent farm expenses can increase and still meet cash flows
0.009
Percent interest rates can increase and still meet cash flows
0.26
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How Are These Calculated?• The training materials include
spreadsheets with: exercise balance sheet, income statement, cash flow budgets
• The correct versions, the financial ratios, &
• Includes a brief interpretation of each ratio and how to improve it.
Engle, UAPB
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Using Cash Flow Budgets to Improve Cash Flow and Liquidity in the Catfish Business
Carole R. EngleAquaculture/Fisheries CenterU. of Arkansas at Pine Bluff
Monthly Cash Flow BudgetItem Jan Feb Mar Apr May Jun Jul Aug Sep Oct
Beginning Cash 15,849.00 39.79 42,835.71 12,065.73 46,466.02 24,256.90 1,145.96 34,568.03 5,806.26 36,263.66 Receipts from catfish sold 60,000.00 60,000.00 60,000.00 60,000.00
Cash Inflow 15,849.00 60,039.79 42,835.71 72,065.73 46,466.02 24,256.90 61,145.96 34,568.03 65,806.26 36,263.66 Operating Cash Expenses
Fingerlings - - 12,415.00 - - - - - - - Feed 3,830.00 4,790.00 5,750.00 6,710.00 7,670.00 8,620.00 10,540.00 11,500.00 14,370.00 9,580.00 Gas, Fuel, and Oil 380.00 470.00 570.00 660.00 750.00 850.00 1,040.00 1,130.00 1,410.00 940.00 Chemicals - - 470.00 - - 470.00 - 620.00 - - Labor 1,000.00 1,000.00 1,730.00 1,730.00 1,730.00 1,950.00 1,950.00 1,950.00 1,950.00 1,730.00 Harvesting & Hauling 717.39 722.79 806.91 692.32 687.24 681.21 695.49 754.85 701.20 729.46 Machine Hire - - - - - 150.00 150.00 290.00 150.00 - Office Expenses 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 Rent 360.00 360.00 360.00 360.00 360.00 360.00 360.00 360.00 360.00 360.00 Repairs and Maintenance 1,310.00 1,310.00 1,310.00 1,310.00 1,310.00 1,310.00 1,310.00 1,310.00 1,310.00 1,310.00 Utilities 190.00 390.00 970.00 1,360.00 1,560.00 2,340.00 2,530.00 2,730.00 2,920.00 2,340.00 Other Operating Costs 360.00 360.00 360.00 360.00 360.00 360.00 360.00 360.00 360.00 360.00
Total Operating Expenses 8,157.39 9,412.79 24,751.91 13,192.32 14,437.24 17,101.21 18,945.49 21,014.85 23,541.20 17,359.46 Fixed Cash Expenses
Taxes and Insurance - - - 4,760.00 - - - - - - Total Fixed cash Expenses - - - 4,760.00 - - - - - - Living Expenses 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00 Other Expenses - - - - - - - - - - Scheduled Debt Payments
Real Estate Principal 265.00 - - 265.00 - - 265.00 - - 265.00 Interest (10% APR) 2,368.75 - - 2,364.33 - - 2,357.71 - - 2,351.08
Equipment Principal - 665.00 - - 665.00 - - 665.00 - - Interest (10% APR) - 2,108.23 - - 2,097.14 - - 2,080.52 - -
Operating Principal - - 1,000.00 - - 1,000.00 - - 1,000.00 - Interest (10% APR) 2,018.07 2,018.07 2,018.07 2,018.07 2,009.73 2,009.73 2,009.73 2,001.40 2,001.40 2,001.40
Total Cash Outflow 15,809.21 17,204.08 30,769.98 25,599.72 22,209.11 23,110.94 26,577.93 28,761.77 29,542.60 24,976.94 Cash Available 39.79 42,835.71 12,065.73 46,466.02 24,256.90 1,145.96 34,568.03 5,806.26 36,263.66 11,286.72 New Borrowing - - - - - - - - - - Cash Balance 39.79 42,835.71 12,065.73 46,466.02 24,256.90 1,145.96 34,568.03 5,806.26 36,263.66 11,286.72
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Cash Flow Scenarios
Farm A Farm B
Sept. $60,000 Feb. $60,000
Oct. $90,000 April $60,000
Nov. $60,000 July $60,000
Dec. $60,000 Sept. $60,000
Nov. $30,000
Engle, UAPB
Liquidity Measures for Two Scenarios
Indicator A B
Cash Flow Coverage (0.26) 0.17
Debt-Servicing 0.21 0.17
Cash avail./cash inflow
(0.02) 0.01
Cash avail./op. expenses
(0.03) 0.02
Cash avail./liabilities (0.01) 0.01
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Adequate Cash Flow:Determined from Cash Flow Budget• Cash flow budget must show realistic
projections of cash revenue for the year, by month.
• Any month with a negative cash flow is a cash flow problem that needs to be resolved.
• Must identify a production/financial plan that generates the revenue when needed.
• If there is a problem, may need to selloff some stock, reduce densities,allow for better growth = better cash flow.
Engle, UAPB
• Decisions on stocking and feeding rates should be based on meeting short-term financial obligations.
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What should I look at this winter?
• Do detailed cash flow budget and know when you need to make payments.
• Using Fishy, project different harvest dates at different stocking & feeding rates.
• Choose feeding and stocking rates that allow farmer to make necessary payments.
Engle, UAPB
Larger fish at stocking reach harvest in shorter time period.
May June July August Sept. Oct.
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Fish grow faster at lower densities.
Engle, UAPB
Cash Flow Simulator:
Files available in training materials on
web site.
Engle, UAPB