Ag Cash Flow / Credit Analysis
Thursday, March 23, 2023
Registration: CBAO members: $349 | Non-members: $524
How can I evaluate agricultural loan repayment alternatives in a timely and cost-effective manner? The agricultural lending environment has changed dramatically from the generally profitable 2006-2013 period. During the period that followed, principal payments on term debt from capital purchases made during more profitable times remained. The result was varying degrees of financial stress among agricultural borrowers. Now, prices have improved, but for how long? A review of the financial information needed to make informed decisions and a spreadsheet that can be used to evaluate repayment alternatives will be covered during this workshop. The sensitivity of changes in revenue and expenses and the impact on the coverage ratio are evaluated for different levels of financial leverage.
Topics Include:
- Introduction, Current State of Farm Financial Reporting in Agriculture
- Balance Sheet – Review with Emphasis on Indicators of Potential Problems
- Deferred Taxes – Review with Emphasis on Tax and Other Expenses Resulting if a Borrower Sells Assets to Satisfy Debt Obligations
- Accrual–Adjusted Income Statement – Justification, Preparation and Review Documents Needed to Complete
- Statement of Owner Equity – Review with Emphasis on the Contribution of Non–farm Income and Impact of Withdrawals for Family Living
- Cash Flow Statement – Review with Emphasis on Multiple Years of Operating Expenses in a Single Operating Line
- Financial Ratio Analysis – Review with Emphasis on Indicators of Potential Problems Using Comparative Data
- Problem Loan Indicators – Examples, including: Buildup of Accounts Payable, Supplier Credit, Overdrafts, Term Out Revolving Lines of Credit every 3–5 years, Delinquent Taxes, Cancels Insurance, Borrows from Relatives w/o Payback Plan, Multiple Lines of Credit, Needs Money Fast, Cannot Meet Payroll, etc.
- Breakeven and Sensitivity Analysis – Discussion Using Purdue Spreadsheet
- Chapter 12 Bankruptcy – Lessons Learned from a 1988 Study of Confirmed Plans
- What to Watch on Your Financial Indicator Dashboard Going Forward
Who Should Attend:
Experienced and novice ag lenders, chief lending officers, and credit analysts would benefit from attending this workshop.
Meet the Facilitator
Freddie L. Barnard
Professor Emeritus of Agricultural Economics, Purdue University
Freddie L. Barnard, Professor Emeritus of Agricultural Economics at Purdue University, is a native of Kentucky and received both a B.S. and M.S. in agricultural economics from the University of Kentucky. He received a Ph.D. in agricultural economics from the University of Illinois in 1982. He retired June 30, 2017 after serving on the faculty at Purdue University for more than 35 years, where he had Extension and undergraduate teaching responsibilities in agricultural finance and agribusiness management. He also served as Director of the Midwest Agricultural Banking School, held each year at Purdue University, a position he held for 38 years. Finally, he served on the Technical Committee of the Farm Financial Standards Council and as Secretary/Treasurer of the Indiana Chapter of the American Society of Farm Managers and Rural Appraisers.
If you are having issues with registering online, please contact CBAO's Education, Training and Special Events Coordinator, Malia Widder, (614) 610-1877.