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AGEC 365 Questions with Answers (100% Correct
Answers)
Return on Farm Assets (ROFA) Answer: Ability of the farm to
generate operating income from asset holdings. The higher the ratio,
the greater the profit per dollar of farm assets
Return on Farm Equity (ROFE) Answer: Ability of the farm to generate
operating income on owner's equity. The higher the ratio, the higher
the profit per dollar of equity
Cost of Farm Debt (COFD) Answer: Shows how costly it is for the farm
to take debt. Cost is measured in terms of interest expense. Lower is
generally better.
Operating Profit Margin Ratio (OPMR) Answer: Return per dollar of
gross income, or operating income relative to farm size. The higher the
ratio, the greater the profit relative to farm revenues.
Working Capital Answer: Amount of cash left over after liquidating
current assets to service current liabilities. Not particularly informative
since it does not take farm size into account
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Current Ratio Answer: Current assets as a proportion of current
liabilities. Must be at least 1 since the farm should have at least enough
current assets to pay current liabilities
Quick (or Acid Test) Ratio Answer: Ability of most liquid current
assets (those that can be liquidated within 90 days) to service current
liabilities. More conservative measure than current ratio
Working Capital to Value of Farm Production Answer: Availability of
cash relative to size of farm operations. Very useful measure because
cash requirements are dependent on farm size.
Leverage (or Debt to Equity) Ratio Answer: Size of farm debt relative
to owner's equity. High ratio means farm aggressively finances growth
with debt. Should not exceed 1 as owner's equity should be greater
than debt.
Debt to Asset Ratio Answer: Proportion of business value that belongs
to creditors. If all assets were sold off, the DTA shows the percentage
that creditors would receive.
© 2025 All rights reserved
AGEC 365 Questions with Answers (100% Correct
Answers)
Return on Farm Assets (ROFA) Answer: Ability of the farm to
generate operating income from asset holdings. The higher the ratio,
the greater the profit per dollar of farm assets
Return on Farm Equity (ROFE) Answer: Ability of the farm to generate
operating income on owner's equity. The higher the ratio, the higher
the profit per dollar of equity
Cost of Farm Debt (COFD) Answer: Shows how costly it is for the farm
to take debt. Cost is measured in terms of interest expense. Lower is
generally better.
Operating Profit Margin Ratio (OPMR) Answer: Return per dollar of
gross income, or operating income relative to farm size. The higher the
ratio, the greater the profit relative to farm revenues.
Working Capital Answer: Amount of cash left over after liquidating
current assets to service current liabilities. Not particularly informative
since it does not take farm size into account
© 2025 All rights reserved
, 2
Current Ratio Answer: Current assets as a proportion of current
liabilities. Must be at least 1 since the farm should have at least enough
current assets to pay current liabilities
Quick (or Acid Test) Ratio Answer: Ability of most liquid current
assets (those that can be liquidated within 90 days) to service current
liabilities. More conservative measure than current ratio
Working Capital to Value of Farm Production Answer: Availability of
cash relative to size of farm operations. Very useful measure because
cash requirements are dependent on farm size.
Leverage (or Debt to Equity) Ratio Answer: Size of farm debt relative
to owner's equity. High ratio means farm aggressively finances growth
with debt. Should not exceed 1 as owner's equity should be greater
than debt.
Debt to Asset Ratio Answer: Proportion of business value that belongs
to creditors. If all assets were sold off, the DTA shows the percentage
that creditors would receive.
© 2025 All rights reserved
