Introduction to Financial Decision Making

This module consists of a short overview of the Financial Decision Making course, with summaries and breakdowns of the different topics covered. This course satisfies Farm Service Agency mandatory borrower education requirements.

Developing Financial Statements

There are four basic financial statements recommended for all farm businesses. This module describes them and the different parts involved in completing them. Beginning with the net worth statement, a sample farm's financials are given for a visual explanation. As a user you will also be given the chance to complete your own net worth statement with a step by step process. Examples, outside sources, worksheets, and spreadsheets are all included to help you through the process.

Next the income statement is explained and what is included in it. After the many different parts are described, more examples, worksheets, and a spreadsheet are given. After both these financial statements are explained, quizzes are in the course to test your knowledge and are graded immediately so you know if you have fully understood everything.

Once all four financial statements have been explained and you have been able to complete them for your own operation, the module tells how they all fit together and can be used in evaluating your farming operation. These financial statements are an essential part of loan applications and business plans, and will be used by lenders to make credit decisions about your operation.

Analyzing Financial Statements

Module 3 continues on with more information about the farm financial statements. It teaches you how to analyze the statements once you have completed them and what the different financial performance measures say about your business. Many different ratios and performance measures are given with descriptions and equations for what they measure. The examples are all based on a sample farm, so they are consistent throughout.

Relating Financial Analysis to
Production Records

The previous module briefly discussed return on assets, but this module goes more in-depth and divides this measurement into its two components. These can then be compared to production benchmarks for analysis. You will learn how your financial statements can point out possible problems with production. Case studies for grain and pork farms are shown as examples of this.

References for further study are links to more explanations of financial statements and the farm business summaries for different areas in Iowa.

Financial Trouble Shooting

Do you know how to analyze the financial shortcomings of your business? Would you like to learn how to analyze if a change in your business would be financially viable? The financial trouble shooting module teaches basic concepts in strategy. It also gives questions for you to answer about your own business to see how prepared you are financially for the future.

You can use these answers and your financial statements and apply the financial troubleshooting information to see where improvements can be made. You will learn how to identify potential causes and setup a diagnostic tree to find a course of action. A case farm is given for you to see how this information all comes together.

Three Case Studies

This module gives three case studies:

• a family farm corporation,
• a farm corporation, and
• a farm partnership

all with different financial situations.

The information from previous modules is compiled here and shown for each situation so you will learn more about analysis and understand more about financial decision making.

12 Steps to Cash Flow Budgeting

A cash flow budget is useful because you are forced to think about your production plans for the year. It will also help project needed operating credit, project loan repayment schedules, help in communications with your lender, and more. You will be given access to a cash flow budget format along with the step-by-step process to make completion easier. The twelve steps are applied to a sample farm through the module to explain the process. Adjustments that may be needed are also explained and shown in the context of the sample farm.

Links to software for developing a cash flow budget are given for more study, along with more explanatory information from outside sources.

Cash Management

Learn about the factors that can keep a profitable farm from cash flowing. You will also learn how to counteract these cash flow problems with a financial contingency plan. With a plan, you can be prepared to cover unexpected cash flow shortages. This module also has an overview of using credit cards and how they can fit into the farm business.

Another topic covered is farm family finances. How do you plan for the farm business and a household budget? Tips for fitting both into a farm budget are included as are expenditure projections for many household expenses. Short worksheets for estimating your expenses allow you to see when more should be budgeted for the household as opposed to the farm.

Links are to more resources on farm financing and the family budget.

Financing Capital Assets

In this module you will learn more on how and where to finance large capital investments. Module 9 covers sources of capital, possibly giving you options you had not thought of before this course. It also covers sources of credit for you to compare and choose which is the right option for you business. A section on leasing gives information on the general types of leases and the questions to ask when considering a farm equipment lease. Links to extension publications are included to give more information and resources.

Next in the module are expenses associated with financing including: interest, income tax considerations, and how these changes in your farm affect: liquidity, profitability, and solvency. You will learn how to compare financing plans and be given a checklist to go through when comparing.

Computer decision aids are available to analyze capital investment decisions you plan on making in the future. These include time value of money and lease versus buy analyses.

References to other sources of information are also available along with a financing alternatives exercise for you to practice what you have learned.

Presentation of a Financial Plan

This module takes what you have learned so far in this course and teaches you how to combine it all into a financial business plan that can be presented to lenders, partners, or a spouse. You will learn what your lender expects from you, and possibly gain some insight into the management objectives of your lender.

The module gives guidelines for preparing and presenting a credit request, including checklists from outside sources. Also find out about choosing or changing lenders and were to go to find FDIC information on all member banks.

This module summarizes everything you have learned from the financial decision making course and shows how it can be used in the lending world to get what you need from financing sources.

Course Registration and More Information

The on-line registration form for Financial Decision Making is available here.

The course fee is $150.00.