Bankrupt or Billionaire: What’s the Business Financial Position?

1. Bankrupt or Billionaire: What’s the Business Financial Position? Balance Sheet Basics

2. Balance Sheet Components • Assets - items owned • Current, non-current assets • Liabilities - items owed • Current, non-current liabilities • Owner equity or net worth • Contributed capital, retained earnings, valuation equity

3. Should you...? • Include personal assets and liabilities on the farm balance sheet?

4. Current Assets • Cash, checking accounts, savings • Investments • Accounts receivable • Prepaid expenses • Cash investments in growing groups • Inventories • Market livestock, stored crops, purchased feed, supplies

5. What values do you use? • Market value • Cost basis

6. Non-Current Assets • Breeding livestock • Machinery, equipment • Vehicles • Investments in capital leases • Land • Buildings and improvements

7. Current Liabilities • Accounts payable • Notes payable • Current portion of term debt • Accrued interest • Taxes payable • Deferred taxes

8. Non-current Liabilities • Notes payable, non-real estate • Notes payable, real estate • Deferred taxes

9. Changes in the balance sheet: What do they tell you? • Are you better off at the end of the year??? • Look at the change in assets relative to change in liabilities • Did owner equity increase? Contributed capital, retained earnings, valuation equity • Valuation technique matters!

10. True or False? • A complete business analysis and balance sheet can be developed without an inventory of assets and liabilities.