108 FUNDAMENTALS OF AGRIBUSINESS FINANCE Table 6.5. Johnson Farms' accrual-adjusted income statement for the year ended...

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108 FUNDAMENTALS OF AGRIBUSINESS FINANCE Table 6.5. Johnson Farms' accrual-adjusted income statement for the year ended December 31, 1999 Cattle sales Johnson Fun dip al current assets Amulated dep Aumulated depr mulated depr current asse $566,000 217,000 Hog sales 185,000 Corn sales 27,000 Government program payments 33,000 Custom work + Increase in accounts receivable 45,000 (31,000) Decrease in inventory Gross Revenues $187,000 $1,042,000 Feed expense 352,000 Purchased market livestock 115,000 Labor expense 44,000 Seed 26,000 Chemicals 19,000 Fuel 16,000 Utilities 5,000 Repairs Veterinary and medicine 11,000 Rent expense 42,000 Property taxes 8,000 Depreciation expense 56,000 + Increase in accounts payable 4,000 Operating Expenses 885,000 Interest expense 140,000 Total Expenses 1,025,000 Net Farm Income from Operations Gain (loss) on the sale of capital assets 17,000 2,000 Net Farm Income 19,000 Miscellaneous revenue (expense) (3,000) Income Before Income Taxes 16,000 Income taxes paid 6,000 + Increase in current portion of deferred taxes 1,000 Income tax expense 7,000 Net Income $ 9,000 b. Write a two-page (or longer) essay summarizing and analyzing the financial ratios of Johnson Farms from an ag lender's perspective. What are the farm's good points? What are some problem areas? Be sure to address the issues of liquidity, solvency, profitability, repayment capacity, and financial efficiency in your essay. 6-6. Construct a common-size income statement and a common-size balance sheet for 1999 from tables 6.5 and 6.6. ppable tes payab pation of term pation of defer pation of te Table 6.6. Johnson Farms' balance sheet as of December 31, 1998, and December 31, 1999 1998 1999 Assets Cash $ 5,000 $ 2,000 Accounts receivable 148,000 193,000 Inventory 290,000 259,000 42.000 Total current assets 443,000 454,000 Breeding livestock 95,000 97,000 Less: accumulated depreciation (14,000) (18,000) Equipment 620,000 610,000 Less: accumulated depreciation (124,000) (167,000) Buildings 384,000 384,000 Less: accumulated depreciation (33,000) (42,000) Land 575,000 575,000 Total noncurrent assets 1,503,000 1,439,000 Total farm assets Liabilities Accounts payable $1,946,000 $1,893,000 $58,000 $62,000 Short-term notes payable 423,000 477,000 000 Current portion of term debt 102,000 102,000 Current portion of deferred taxes 25,000 26,000 Total current liabilities 608,000 667,000 00 00 Noncurrent portion of term debt 967,000 865,000 00 Deferred taxes-noncurrent 16,000 16,000 00 0 Total noncurrent liabilities 983,000 881,000 0 Total liabilities 1,591,000 1,548,000 Retained capital 335,000 325,000 Valuation equity 20,000 20,000 Total owner's equity 355,000 345,000 Total liability and owner's equity $1,946,000 $1,893,000 108 FUNDAMENTALS OF AGRIBUSINESS FINANCE Table 6.5. Johnson Farms' accrual-adjusted income statement for the year ended December 31, 1999 Cattle sales Johnson Fun dip al current assets Amulated dep Aumulated depr mulated depr current asse $566,000 217,000 Hog sales 185,000 Corn sales 27,000 Government program payments 33,000 Custom work + Increase in accounts receivable 45,000 (31,000) Decrease in inventory Gross Revenues $187,000 $1,042,000 Feed expense 352,000 Purchased market livestock 115,000 Labor expense 44,000 Seed 26,000 Chemicals 19,000 Fuel 16,000 Utilities 5,000 Repairs Veterinary and medicine 11,000 Rent expense 42,000 Property taxes 8,000 Depreciation expense 56,000 + Increase in accounts payable 4,000 Operating Expenses 885,000 Interest expense 140,000 Total Expenses 1,025,000 Net Farm Income from Operations Gain (loss) on the sale of capital assets 17,000 2,000 Net Farm Income 19,000 Miscellaneous revenue (expense) (3,000) Income Before Income Taxes 16,000 Income taxes paid 6,000 + Increase in current portion of deferred taxes 1,000 Income tax expense 7,000 Net Income $ 9,000 b. Write a two-page (or longer) essay summarizing and analyzing the financial ratios of Johnson Farms from an ag lender's perspective. What are the farm's good points? What are some problem areas? Be sure to address the issues of liquidity, solvency, profitability, repayment capacity, and financial efficiency in your essay. 6-6. Construct a common-size income statement and a common-size balance sheet for 1999 from tables 6.5 and 6.6. ppable tes payab pation of term pation of defer pation of te Table 6.6. Johnson Farms' balance sheet as of December 31, 1998, and December 31, 1999 1998 1999 Assets Cash $ 5,000 $ 2,000 Accounts receivable 148,000 193,000 Inventory 290,000 259,000 42.000 Total current assets 443,000 454,000 Breeding livestock 95,000 97,000 Less: accumulated depreciation (14,000) (18,000) Equipment 620,000 610,000 Less: accumulated depreciation (124,000) (167,000) Buildings 384,000 384,000 Less: accumulated depreciation (33,000) (42,000) Land 575,000 575,000 Total noncurrent assets 1,503,000 1,439,000 Total farm assets Liabilities Accounts payable $1,946,000 $1,893,000 $58,000 $62,000 Short-term notes payable 423,000 477,000 000 Current portion of term debt 102,000 102,000 Current portion of deferred taxes 25,000 26,000 Total current liabilities 608,000 667,000 00 00 Noncurrent portion of term debt 967,000 865,000 00 Deferred taxes-noncurrent 16,000 16,000 00 0 Total noncurrent liabilities 983,000 881,000 0 Total liabilities 1,591,000 1,548,000 Retained capital 335,000 325,000 Valuation equity 20,000 20,000 Total owner's equity 355,000 345,000 Total liability and owner's equity $1,946,000 $1,893,000