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Junior and Senior level Ag Bus. | |Colorado Agriscience Curriculum

|Section: |Advanced Agribusiness |

|Unit: |Agricultural Business Records |

|Lesson Title: |Cash Flow |

|Colorado Ag Education Standards|AGB11/12.03 - The student will be able to formulate and analyze financial records and use the information for |

|and Competencies |evaluation and planning. |

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| |Complete and analyze cash flow projections, income statements, and balance sheets. |

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|Colorado Model Content |Math Standard 3: Students use data collections and analysis, statistics, and probability in problem-solving |

|Standard(s): |situations and communicate the reasoning used in solving these problems. |

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| |Math Standard 6: Students link concepts and procedures as they develop and use computational techniques, including |

| |estimation, mental arithmetic, paper-and-pencil, calculators, and computers, in problem-solving situations and |

| |communicate the reasoning used in solving these problems. |

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| |English Standard 1: Students read and understand a variety of materials. |

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| |English Standard 4: Students apply thinking skills to their reading, writing, speaking, listening, and viewing |

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| |English Standard 5: Students read to locate, select, and make use of relevant information from a variety of media, |

| |reference, and technological sources. |

|Student Learning Objectives: |Upon completion of this lesson the student will be able to: |

| |Define what a cash flow summary and cash flow projection is. |

| |State the advantages and disadvantages of a cash flow projection. |

| |Compile a cash flow from the financial data in the financial scenario. |

| |Analyze a cash flow. |

|Time: |50 minutes |

|Resource(s): |2005 National Farm Business Management Test |

| |John Deere Farm and Ranch Business Management |

|Instructions, Tools, Equipment,|Italicized words are instructions to the teacher, normal style text is suggested script. |

|and Supplies: |*1 copy/student and a copy for the teacher of the scenario found in unit 1 lesson 4-6 scenario file. It might even be|

| |helpful to make single sided copies so that a student can analyze several bits of information at one time. |

| |*Over head Projector, LCD projector, Computer and whiteboard with markers. |

| |*Blank cash flow worksheet for each student |

| |*Overhead transparency of blank cash flow worksheet for teacher demonstration. |

| |*Cash flow answer key in hand for teacher. |

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|Interest Approach: |Divide students into two groups. One group will be the expense group and one group will be the income group. Have |

| |each respective group come up with a list of incomes or expenses that would relate to an agriculture business or |

| |production enterprise in your area. Once students have come up with their list, have the first group write their |

| |projected incomes up on the board. Once the income group is finished, have the expense group write their projected |

| |expenses on the board. Once done, have everyone add the incomes and then subtract the expenses out of the income. |

| |Then explain to the students that they have basically completed a very simple projected cash flow. Ask them why it is|

| |important to project cash flow. Ask them if by chance a monthly cash flow would be even more useful. Also point out |

| |that if the outcome is negative that some adjustments should be made. (This may very well happen since the groups did|

| |not work together.) Point out that cash flows are important so that a business can predict times when money is |

| |plentiful and when money is tight. Also ask the difference between a projection and a summary. Explain that a |

| |summary summarizes the previous year’s records. A projection, projects what incomes and expenses a business will have|

| |in the year to come. |

|Objective 1: |Define what a cash flow summary and cash flow projection is |

| |Utilize PowerPoint through lesson as it directly aligns with all note taking sections so you don’t have to write as |

| |much information on the board. |

| |What is a cash flow summary and a cash flow projection? |

| |A cash flow summary is the actual result of money transactions during the year. A cash flow summary contains the |

| |financial history of a business over a period of time, usually 1 year. |

| |A cash flow projection deals with the future plan of all money transactions for a specific time period, usually 1 |

| |year. Generally the cash flow is conducted on a monthly basis. |

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|Objective 2: | |

| |State the advantages and disadvantages of a cash flow projection |

| |What are the advantages of a cash flow projection? |

| |It shows the operator when excess cash will be available, and when cash deficits will occur. |

| |It provides for budgeted loans that are borrowed only for the periods through which they are required. |

| |It provides a technique for combining personal and farm or ranch financial needs for the next period. |

| |It lets you plan purchases |

| |It allows comparison of the cash flow projection with the cash flow summary to record actual performance against the |

| |advanced planning. |

| |It helps you evaluate the relationship of you short term debt to your repayment capacity |

| |It lets the manager immediately see the cash position throughout the year. |

| |What are the disadvantages of a cash flow projection? |

| |Collection of data takes time. |

| |Projected prices are difficult to estimate. |

| |Borrowing rates may fluctuate. |

| |Family and business consumption of resources may vary. |

| |Inventories constantly change. |

| |The entire cash flow projection plan needs constant review and revision. |

|Objective 3: | |

| |Compile a cash flow from the financial data in the financial scenario. |

| |Utilize the Excel documents Cash Flow Work Sheet and Cash Flow Answer Key. The best way to teach this is to make sure|

| |you are utilizing the financial statement scenario and make a transparency of the worksheet. Using an overhead |

| |projector work through the first 3 months together. Students pick up these concepts pretty easily and will be able to|

| |work on their own after the first 3 months. However, make sure you check their totals in every month when they are |

| |done. Do not have students do these worksheets on the computer. They must do them by hand to understand the math |

| |behind the cash flow. |

|Objective 4: |Analyze a cash flow. |

| |Analyzing a cash flow. (Answer the following questions as a class upon completion of the cash flow statement example.)|

| |What is the maximum amount they will have to borrow in any one month? |

| |$17,286 (April) |

| |What are the projected total operating receipts for the year 2005? |

| |$579,698 |

| |What are the total cash outflows projected for the year 2005? |

| |$645,026 |

| |What are the total cash inflows projected for the year 2005? |

| |$625,298 |

| |What is the projected operating loan balance on December 31, 2005? |

| |0 |

| |In what month do they have they greatest positive cash difference? |

| |December ($95,544) |

| |What was the beginning of the year operating loan balance? |

| |0 |

| |In what month does the Tucker’s farm business have the most negative cash position? |

| |April ($-15,286) |

| |What is the largest projected operating expense item? |

| |Labor Hired ($152,325) |

| |How much principal does the Tucker’s farm business plan to pay on all operating loans during the year? |

| |$27,361 |

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|Review/Summary: |Close class with asking students how a good cash flow could help them manage their businesses better. Once this |

| |discussion is complete, have students list three advantages and three disadvantages of a cash flow. Call on a few |

| |students to share their answers. |

|Application--Extended Classroom|Have students create their own mini scenario to complete a cash flow. Have them also complete an answer key. This |

|Activity: |will be a great review for them to turn in for homework. |

|Application--FFA Activity: |This information was pulled from the national farm business management exam. This whole curriculum would be perfect |

| |to get a farm business management team started. |

|Application--SAE Activity: |Have students look at their own records and actually complete a good cash flow now that they understand how one works.|

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|Evaluation: | |

| |What is the difference between a cash flow summary and a cash flow projection? |

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| |Name 2 advantages and 2 disadvantages of cash flows. |

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| |What are three items that need to be included on a cash flow statement? |

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| |How can a manager use a cash flow to make financial decisions? |

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|Evaluation Answer Key: |A cash flow summary summarizes the previous year’s cash inflows and outflows so a manager can predict when money will |

| |be available and when money will be short. A cash flow projection tries to predict incomes and expenses for the |

| |upcoming year so purchases and borrowing can be planned. |

| |See the list in the lesson |

| |See the cash flow statement worksheet |

| |A cash flow helps a manger plan purchases and borrowing in order to best manage a business. |

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