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

Balance Sheet Basics

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

Should you...?

Include personal assets and liabilities on the farm balance sheet?

Current Assets

Cash, checking accounts, savingsInvestmentsAccounts receivablePrepaid expensesCash investments in growing groupsInventories

Market livestock, stored crops, purchased feed, supplies

What values do you use?

Market valueCost basis

Non-Current Assets

Breeding livestockMachinery, equipmentVehiclesInvestments in capital leasesLandBuildings and improvements

Current Liabilities

Accounts payableNotes payableCurrent portion of term debtAccrued interestTaxes payableDeferred taxes

Non-current Liabilities

Notes payable, non-real estateNotes payable, real estateDeferred taxes

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!

True or False?

A complete business analysis and balance sheet can be developed without an inventory of assets and liabilities.