Agricultural Land Leases

1
Farming, Women and Money
2
Objectives

• Keep good records
• Constructing financial statements
• Understanding financial statements

3
Financial Records

• It is too hard
• What do I know about farming
• I am not an accountant
• Schedule F is hard enough for me
• Someone else keeps the books and it is not my
  responsibility.
• There is not enough time.

4
Take Action

• Make sure you have a set place to work on records
  (preferably not the kitchen table.)
• Set aside a little time and get in a routine

5
Regular financial duties

• Paying bills and payroll
• Writing correspondence
• Scheduling when money comes in and goes out.
• Reviewing debt obligations
• Paying debt
• Depositing money
• Allocating money to investments, operating
  accounts, checking accounts, etc.
• Reconcile checkbook (important way to find errors)

6
Financial Statements

• Balance Sheet
• Cash Flow
• Income Statement

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Key Financial Terms

• Balance Sheet-A statement of financial position
  that shows the assets, liabilities, and net worth
  of the business at any one given point in time.
• Assets-Everything that the business owns,
  including such items as cash, inventory, prepaid
  expenses, and equipment.
• .

8
Key Financial Terms

• Current Assets-What the business owns that is
  expected to be turned into cash within one
  year-such as accounts receivable and inventory
• Non Current
• Intermediate Assets-What the business owns that
  has a moderate length of life of over 1 year but
  not more than 7 in most cases.
• Fixed Assets-Assets that are used to generate
  revenue for the business such as buildings,
  machinery and land.
• .

9
Key Financial Terms

• Depreciation-The process of allocating the cost
  of a fixed asset (such as equipment) to the
  period that it benefits the business-writing
  off its cost over its useful life. Not a cash
  expenditure.
• Liabilities-What the business owes to creditors
  and to the people who supply funds that must be
  repaid. Debt is used to describe an ongoing
  liability, such as a bank loan.

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Key Financial Terms

• Current Liabilities-Obligations which are due to
  be repaid within one year.
• Non-Current
• Intermediate Liabilities- Obligations that are
  due to be paid longer than one year but usually
  within 3-7 years.
• Long-Term Liabilities-Obligations that are
  scheduled to be repaid in a period greater than
  7 years. This is also referred to as Long-Term
  Debt.

11
Key Financial Terms

• Owners Equity-The value of the owners in the
  assets of the business. The equity of the owners
  is the assets less the liabilities. This is
  also called Net Worth.
• Net Profit-The amount remaining after
  deductingall costs of doing business.

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Key Financial Terms

• Gross Profit - Sales minus the Cost of Goods
  Sold, which is the cost of purchasing or
  producing the goods sold during that accounting
  period.
• Income Statement-The summary of the revenues,
  costs, and expenses of a company that are
  recognized during an accounting period. Also,
  frequently called a profit and loss statement, P
  L, or income and expense statement

13
Balance Sheet

• A Balance Sheet is a snapshot of how funds are
  invested in a business (assets) and the financing
  methods used (liabilities and owners equity) at
  any one given point in time
• Typically, done at the same time each year.

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Balance Sheet

• Assets Liabilities
• Current _____ Current _____
• Non Current Non Current
• Intermediate _____ Intermediate _____
• Long Term _____ Long Term _____
• Total Assets _____ Net Worth _____

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Income Statement

• Gross Cash Income _______
• Cash Operating Expense (-) _______
• Net Cash Income ()_______
• Inventory Changes ( or -)_______
• Depreciation (-)_______
• Net Farm Income ()_______

16
Cash Flow

• Monthly
• Projections and Actual
• Can you meet financial obligations in a timely
  fashion?
• What is generating income?

17
Income Statement

• Did you make money
• Projections and Actual
• Can you meet financial obligations in a timely
  fashion?
• What is generating income?

18
Questions?
Original PowerPoint created by Mary Sobba,
University of Missouri