Ag Cash Flow / Credit Analysis
Wednesday, March 11, 2020
Measuring Financial Condition and Performance for Agricultural Businesses
The 2019 crop year can probably best be described as a roller coaster ride that would exceed anything you could ever find at an amusement park. Producers and their lenders experienced every emotion during the year from late to no planting to better than expected crop yields to genuine concern that commodity prices during the next year or so, and perhaps beyond, may not cover production costs. Furthermore, that overall assessment of production and commodity prices does not represent all producers; depending on production, marketing and leverage. Consequently, the financial impact will vary across producers and assessing that impact will require the ability to assess each individual operation. The program will focus on the preparation and use of financial statements, including an accrual-adjusted income statement, to calculate some of the most commonly used financial measures and how to compare those measures to industry averages. Also, a spreadsheet that is available at no cost, is used to illustrate how to prepare an accrual-adjusted income statement and then assess the impact of a variety of revenue, expense and interest rate scenarios on profitability and repayment capacity. What is ahead for 2020 and beyond? Who knows, but we better be ready to buckle up and hang on, because that roller coaster car is about to leave the platform and we better be prepared for the some unexpected twists, turns, ups and downs. All aboard!
8:30 – 9:00 am Registration and Continental Breakfast
9:00 – 9:20 am Introduction
9:20 – 9:30 am Balance Sheet Review with Emphasis on Indicators of Potential Problems
9:30 – 9:45 am Answers to Practical Exercise 2
9:50 – 10:00 am Break
10:00 – 10:15 am Deferred Taxes – Review with Emphasis on Tax and Other Expenses Resulting if a Borrower Sells Assets to Satisfy Debt Obligations
10:15 – 10:25 am Practical Exercise 3, using Worksheet
10:25 – 10:30 am Answers to Practical Exercise 3, and a Discussion of Software Available
10:30 – 10:50 am Accrual-Adjusted Income Statement Justification, Preparation and Review Documents Needed to Complete
10:50 – 11:00 am Break
11:00 – 11:15 am Practical Exercise 4
11:15 – 11:45 am Statement of Ownership Equity – Review with Emphasis on the Contribution of Non-Farm Income and Impact of Withdrawals for Family Living
11:45 – 11:55 am Practical Exercise 5
11:55 am – Noon Answers to Practical Exercise 5
Noon – 1:00 pm Lunch
1:00 – 1:15 pm Cash Flow Statement Review – Review with Emphasis on Multiple Years of Operation Expenses in a Single Operating Line
1:15 – 1:40 pm Practical Exercise 6
1:40 – 1:45 pm Answers to Exercise 6
1:45 – 1:50 pm Review Answers to Exercise 1
1:50 – 2:00 pm Break
2:00 – 2:50 pm Financial Ratio Analysis – Review with Emphasis on Indicators of Potential Problems Using Comparative Data
2:50 – 3:00 pm Break
3:00 – 3:30 pm Breakeven Analysis: Evaluating and Prioritizing Alternatives for Addressing Problem Loans – Discussion Using Purdue Statement
3:30 – 3:50 pm Lending to Multi-Family Farming Operations – What to Watch for and Why
3:50 – 4:00 pm Questions and Answers
Who Should Attend:
Experienced and novice ag lenders, chief lending officers, and credit analysts would benefit from attending this workshop.
Meet the Facilitator: Freddie Barnard
Freddie L. Barnard, Professor Emeritus of Agricultural Economics at Purdue University, is a native of Kentucky and received both a B.S. and M.S. in agricultural economics from the University of Kentucky. He received a Ph.D. in agricultural economics from the University of Illinois in 1982. He retired June 30, 2017 after serving on the faculty at Purdue University for more than 35 years, where he had Extension and undergraduate teaching responsibilities in agricultural finance and agribusiness management. He also served as Director of the Midwest Agricultural Banking School, held each year at Purdue University, a position he held for 38 years. Finally, he served on the Technical Committee of the Farm Financial Standards Council and as Secretary/Treasurer of the Indiana Chapter of the American Society of Farm Managers and Rural Appraisers.