Case Study - Answer Sheet March 15, 2014

Financial Ratios Equity Position –Before Purchase 40% –After Purchase 31% Liquidity –Before Purchase 25% –After Purchase 10% Efficiency Ratio –Before Purchase 70% –After Purchase 63% 2

Management Benchmarks Knows Cost of Production Green/Yellow (Green if just hay/Yellow after purchase) Credit Score Green/Yellow Risk Management Some Business PlanRed 3

S.W.O.T StrengthsWeaknesses Knowledgeable about the industryMoney set aside for college? Family’s insurance is paid by Jane’s job Operation may need to support additional family members They have off-farm incomeDo not have much liquid cash, especially after down payment They use family for laborNo business plan Jane’s knowledge of record keepingSeeking 90% financing Good credit scoresOpen Market sales BudgetsMay not be knowledgeable about the corn industry Operation is profitable Crop Insurance Corn allows diversity 4

S.W.O.T OpportunitiesThreats New purchase close to their operationNo diversification Children want to return to the operation – new ideas Commodity down turn More owned vs. rented groundWeather related conditions Ability to diversify with more groundIncreased input costs Current high cattle marketVolatile overseas markets Potential exposure to more markets with more product available to sell Local market competition Environmental contaminants 5

Financial & Management Benchmark Benchmark Measure GreenYellowRedTom & Jane Before Purchase Tom & Jane After Purchase Equity Position>65%35-65%<35%40%31% Liquidity>50%20-50%<20%25%10% Efficiency Ratio<70%70-80%>80%70%63% Knows cost of Production By EnterpriseOverallNoneYesOverall Credit Score> < Risk ManagementAll ComponentsSomeNoneSome Business PlanWrittenVerbalizedNone 6