|Financial Case Study|
is a simple case study involving a fruit producer from the northeastern
His/her financial statements which include a Balance Sheet,
Enterprise Budgets, and a projected Cash Flow Statement were prepared
utilizing Finpack®, agricultural financial planning and analysis
software developed by the University of Minnesota’s Center for Farm
Take a look at the numbers and try to identify those areas where
risk may have a negative impact.
husband and wife are partners in this fruit operation along with their
son and one seasonal employee. With
a minimal amount of custom hire, they farm approximately 45 acres. They
grow apples, peaches, and sweet corn that they sell both wholesale and
retail. The also produce
apple cider. For more detailed information, please refer to the set of
actual financial statements.
Balance Sheet is the most important financial statement.
It is a summary or “snapshot” of the assets, liabilities, and
owner’s net worth or equity at one point in time.
The Balance Sheet is the critical part of a loan application and
it shows financial position and progress.
This is calculated by subtracting their total liabilities
($287,483) from their total assets ($2,218,579).
(anything of value) are divided into current (one year or
less), intermediate (one to ten years), and long term (more than
their assets, their liabilities (financial
commitments or debts) are divided into the same categories, current,
intermediate, and long term.
fruit farm family has developed enterprise budgets for each of the
commodities that they produce and subsequently sell. These particular
budgets include the yield and price, as well as direct expenses
associated with the individual commodity on a per acre per year basis.
The budgets reflect the average of the expenses and income over
the past few years.
to the actual budgets, you will note the following return (per acre)
over direct expenses for each of the commodities:
Apples (New Trees)
these examples, all of the expenses that were difficult to break out on
a per-acre per-commodity basis are included in the projected cash flow
as lump sums spread out throughout the year.
Projected Cash Flow
to the first page of the Cash Flow, please note that the ending cash
balance is $58,571 in the Cash Flow Summary. Over the course of the year
this nursery farm was required to borrow $13,457 all of which it was
able to pay back before the end of the year.
By doing their cash flow projection, they could make plans to
secure an operating loan at the beginning of the year.
you look at the Farm Financial Standard Measures, also on the first
page, plug the numbers into the Farm Finance Scorecard that also
includes the definitions and calculations of the measures. These
measures will provide a summary of the financial health of the nursery
operation ranking the farm’s performance from vulnerable to strong.