Agricultural producers often show a loss on their income tax returns in order to minimize their tax obligations; and then assume, and assure the lender, the operation is doing fine. However, during periods of low net farm incomes, such as we are currently experiencing in agriculture, it is essential to use a more accurate measure of firm profitability. It is common to see the difference between cash net farm income and accrual-adjusted net farm income to be more than 50 percent.
The session presents a spreadsheet that prepares an accrual-adjusted income statement. The resulting profitability information helps determine possible problem areas going forward. Finally, a comparison is presented of the effectiveness of changes in selected operating and loan terms on loan repayment capacity.
In this webinar, you will learn about different types of risks, how to manage and price risk, and how to stress test your agricultural loan portfolio to measure and mitigate risk.
- The agricultural environment during the period of relatively high commodity prices and the resulting decisions to purchase capital items, which continue to have principal payments during the current low net farm income years
- Benefits of preparing an income statement for agricultural businesses
- Benefits of preparing a quarterly or monthly projected cash flow statement during the current situation rather than an annual projected cash flow statement
- Magnitude of the differences between net farm income calculated using a cash basis schedule F versus net farm income calculated using an accrual-adjusted income statement
- Spreadsheet that is available to prepare an accrual-adjusted income statement
- Comparative data that can be used to determine potential problem areas
- Effectiveness of changes in operating strategies and loan terms on repayment capacity
Who Should Attend?
- Senior loan officers who supervise loan officers who make loans to agricultural producers
- Loan officers who make loans to agricultural producers
- Credit analysists who analyze agricultural loans