Farm Management Exam 2 Questions with Correct Answers Latest Update 2025/2026
The current ratio is a measure of a farm firm's - Answers Ability to pay short-term credit
obligations
Two similar farms could have the same return to management but different net farm income
due to - Answers Differences in amount of unpaid labor and equity capital used
In general terms, efficiency refers to: - Answers The volume of production generated per unit of
resource utilized in the farm business
A trend analysis for a farm business could be performed using what kind of data for
comparison? - Answers Historical data from the same farm for the past five years
The degree to which a farm's assets adequately secure its debts is referred to as: - Answers
Solvency
An advantage to using the value of working capital instead of a cash flow budget to analyze a
farm's liquidity: - Answers It is simpler to calculate
When the value of livestock production per $100 feed fed is greater than 100 it means that: -
Answers Feed costs were less than gross revenue adjusted for inventory changes, home
consumption and livestock purchses
Which of the following ratios does not analyze the solvency of the farm business? - Answers
Turnover ratio
Which of the following is a measure of economic efficiency? - Answers Gross revenue per year
of labor
Low profitability can be caused by: - Answers All of the above can cause low profitability
The debt/asset ratio and the debt/equity ratio both measure the overall solvency of the farm
business. - Answers True
Cash grain farms can usually operate safely with a lower current ratio than dairy farms. -
Answers False
Increasing livestock production by building up inventories of raised breeding stock and feed can
cause temporary liquidity problems. - Answers True
Most of the information needed for analyzing profitability comes from the balance sheet. -
Answers False
The return on assets (ROA) is a good measure of the marginal return that can be expected from
investing more capital in the business. - Answers False
The current ratio is a measure of a farm firm's - Answers Ability to pay short-term credit
obligations
Two similar farms could have the same return to management but different net farm income
due to - Answers Differences in amount of unpaid labor and equity capital used
In general terms, efficiency refers to: - Answers The volume of production generated per unit of
resource utilized in the farm business
A trend analysis for a farm business could be performed using what kind of data for
comparison? - Answers Historical data from the same farm for the past five years
The degree to which a farm's assets adequately secure its debts is referred to as: - Answers
Solvency
An advantage to using the value of working capital instead of a cash flow budget to analyze a
farm's liquidity: - Answers It is simpler to calculate
When the value of livestock production per $100 feed fed is greater than 100 it means that: -
Answers Feed costs were less than gross revenue adjusted for inventory changes, home
consumption and livestock purchses
Which of the following ratios does not analyze the solvency of the farm business? - Answers
Turnover ratio
Which of the following is a measure of economic efficiency? - Answers Gross revenue per year
of labor
Low profitability can be caused by: - Answers All of the above can cause low profitability
The debt/asset ratio and the debt/equity ratio both measure the overall solvency of the farm
business. - Answers True
Cash grain farms can usually operate safely with a lower current ratio than dairy farms. -
Answers False
Increasing livestock production by building up inventories of raised breeding stock and feed can
cause temporary liquidity problems. - Answers True
Most of the information needed for analyzing profitability comes from the balance sheet. -
Answers False
The return on assets (ROA) is a good measure of the marginal return that can be expected from
investing more capital in the business. - Answers False
