![]() Cash flows from financing activities are computed by subtracting principal payments from loans received during the year. In other words, cash flows from operating activities or from financing activities will need to be used to help pay for the assets. If a farm is planning on purchasing assets, cash flows from investing activities will be negative. Cash flows from investing activities are computed by subtracting capital asset purchases from capital asset sales. Cash flows from operating activities are computed by subtracting cash farm expenses, owner withdrawals (e.g., family living withdrawals), and income and self-employment taxes from cash farm receipts. The five primary categories of a sources and uses of funds statement are beginning cash balances, cash flows from operating activities, cash flows from investing activities, cash flows from financing activities, and ending cash balances. An example of a sources and uses of funds statement using historical data is illustrated and described by Langemeier (2019). Specifically, this statement can be used to examine whether the farm has enough cash flow from the farm to repay debt and purchase assets. In addition to providing a mechanism for reporting how a farm’s performance during an accounting period influenced and was influenced by major funding activities, a sources and uses of funds statement is useful when developing contingency plans. This article illustrates the use of contingency plans for a case farm in southwest Indiana. Given the expected drop in crop prices this fall, it would be prudent for a farm to examine the sensitivity of their cash flow and repayment capacity to changes in crop prices. Contingency plans related to how to respond to changes in projected cash flows are also important. One of the most common contingency plans used by a business, particularly a small business, relates to how to respond to the departure or absence of key personnel. Contingency plans are often referred to as “Plan B”. Illinois Farmland Leasing & Rental FormsĪ contingency plan is a course of action designed to help a business determine how to respond to possible future events.Illinois Crop Budgets & Historic Returns. ![]()
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