A 60-string farm in Lares produces bananas and bananas. In addition, due to the elevation and location
Question:
A 60-string farm in Lares produces bananas and bananas. In addition, due to the elevation and location near a lake, the land and the farm have amenities (view of the lake, vegetation and trails) that make it ideal for business with ecotourism purposes. Close friends of the farm administrator have advised him to enter the ecotourism business as a hotel or inn and leave agricultural production, given the potential climatic risks (droughts, storms and hurricanes). His friends from the guild have generally done better in the ecotourism business than in agriculture. However, changing the business of the farm requires new investments in structure, facilities, sustainable technologies and tourist activities (such as hiking and mountaineering). Despite the natural phenomena, the production of bananas and bananas has been satisfactory and the financial situation of the farm has been, on average, healthy during the last decade. However, the administrator (and owner) of the farm does not rule out the possibility and wishes to evaluate the alternative of entering the ecotourism business.
The administrator knows that he must do an internal and external scan and hires you as a consultant to advise him in this decision-making process. In this task we will only deal with internal scan.
1. Although there are a series of variables that could be considered to make a decision whether to continue the agricultural business or to start an ecotourism project, are three relevant variables in relation to the available resources that should be in the group of variables to be evaluated in this particular case?
☐ Surface of the farm; unproductive area; agricultural production
☐ Type of livestock; unproductive area; number of farm workers
☐ Agricultural production; percentage of mechanized production; area dedicated to the livestock sector
☐ Unproductive area; agricultural production; number of crops
☐ All of the above
2. Although the mission of the business has not been written, the values and goals of the farm are defined and are: the effort and family work transmitted from generation to generation, caring for the environment in agricultural practice and financial profitability. The administrator asks you to review and choose a mission for the farm that reflects the values and goals mentioned above, based on the criteria of elaboration of the mission of a business that we saw in class, which one would you advise to select?
☐ As a business we want our agricultural activities to be profitable and entertaining.
☐Our farm works as a family so that our agricultural activities are profitable and ecological for the harvest of quality products for the community.
☐ At our farm we strive to work to serve our customers, employees, and community.
3. The manager asks you to make a statement of financial position to measure the performance of the farm in the last year. After collecting the necessary information, the administrator gives you the following items of the assets, liabilities and equity accounts in no specific order:
1. Common shares: $ 160,000; 2. Cash: $ 426; 3. Accounts Payable: $ 26,440; 4. Equipment, tractors and infrastructure: $ 430,000; 5. Accumulated depreciation: $ 19,000; 6. Notes payable to 20 years: $ 380,000; 7. Inventory: $ 62,800; 8. Retained earnings: $ 69,542; 9. Net accounts receivable: $ 98,406; 10. Interest payable: $ 6,650; 11. Land: $ 70,000. It has no intangible assets ($ 0).
With the above information, make a statement of financial position and obtain the following values:
1. Net worth of equipment, tractors and infrastructure
☐ $ 430,000
☐ $ 449,000
☐ $ 411,000
☐ $ 455,650
☐ None of the above
2. Total asset value
☐ $ 481,000
☐ $ 509,832
☐ $ 642,632
☐ $ 319,368
☐ None of the above
3. Value of current liabilities
☐ $ 26,440
☐ $ 413,090
☐ $ 33,090
☐ $ 26,866
☐ None of the above
4. Total value of liabilities
☐ $ 413,090
☐ $ 380,000
☐ $ 33,090
☐ $ 481,000
☐ None of the above
5. Total equity value
☐ $ 446,426
☐ $ 258,406
☐ $ 160,000
☐ $ 229,542
☐ None of the above
6. Total value of liabilities + equity
☐ $ 229,542
☐ $ 262,632
☐ $ 642,632
☐ $ 255,982
☐ None of the above
4. After preparing the statement of financial position, for practical purposes of evaluating liquidity and solvency, the administrator wants to know what the working capital ratio is and two financial or leverage ratios (debt to assets and debt to equity), respectively.
☐1.55; 0.20; 1.42
☐18.22; 0.05; 0.25
☐4.88; 0.64; 0.36
☐0; 0.64; 0.36
☐ None of the above
5. Based on this portion of the internal scan and the accounting and financial analyzes you performed in this task, what would you tell the farm manager (one paragraph) and what next steps would you advise in deciding whether or not to change the line of business. business (list three)?
