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B & B Bounty Farms Financial Report

By: Matthew LaVoy

Financial record keeping is important in many ways. You are able to see what youre
spending and how much money is being put out towards your expenses. It is also helpful when it
comes time to file your taxes and fill out tax forms. All of your spending history is written down
already which makes the process much easier to accomplish. Our analyzation will cover the
records and financial status of Bounty Farms from 1999 to 2007. We will compare numbers from
previous years and visualize what kind of financial position their company is in.
The first numbers we will compare is their current ratio numbers. A companys current
ratio is used to show about how well a company can pay back their liabilities-which is what they
owe on items- with their assets, money they brought in. This number is usually written as a ratio
and shows a safe standing for the company if its above 1.50. Bounty Farms current ratio is
6.63:1. This is very strong and has been like that for a few years. They started low around 0.96 in
1997 but then jumped up high in 2005. They have definitely improved in this section.
Working capital is a comparison between your liabilities and assets. It shows the
difference between the two numbers. For example, if your working capital is a negative number,
it means that you owe more money than the amount of money you have brought in. If this
number is positive, then that means you are able to pay back your debts because you have made
more than enough money to do so. For the farm, their working capital is $777,019. That means
they have $777,019 in an account to use to pay their liabilities. Their first year on record was a
negative $8,000. It got a little better but never really improved substantially until 2005. From
there, they had plenty of income for a cushion.
A debt to asset ratio is an important number in a companys financial status. This ratio
tells you how your assets are financed. It basically explains if you are paying for your assets and

bills with money that you have saved, or if you are paying off of borrowed money. As of now,
their ratio is 0.36:1. To sum it up, they are using about 36% of debt money to pay for their
liabilities. Ideally, this number should be below 30%, but it isnt far from the good range which
is good. They started off in bad shape with this number being around 70%, near a weak range. It
has slowly gotten better and is now really close to being pretty good.
Just like the debt to asset ratio, a debt to equity ratio deals with borrowed (debt) money.
The difference between the two is that the debt to asset ratio deals with current spending and the
debt to equity ratio deals with future spending. This ratio shows how much money is being
borrowed to finance future spending on items. Bounty Farms ratio number is at 0.56:1. In
comparison to the last ratio, this one started off bad at 227% in 1999. It has progressively gotten
better and is close to being in a good range as well. If it reaches 42%, then that is a strong
number.
Another important number to look at here is the Rate of Return on Assets (ROA). This
percentage shows a rate at which you are making and bringing in income. As long as the rate of
return is larger than loan percentage rate, then the company is making a profit. If the interest rate
on the loan is lower than the rate youre making money, then the company isnt all that
profitable. The farms ROA is at a strong 9%. They are sitting solid in this category as long as
they are above 5%. Bobs farm has been strong throughout the years except in 2003 and 2004.
They hit it low but bounced back soon after.
The main difference between ROA and ROE is debt. If there is no debt, then the two
numbers wouldnt be comparable because they would be the same. Rate of Return on Equity
(ROE) is how the company spends its shareholders money. If the company decided to take out a

loan, then the ROE percentage would be higher than the ROA percentage. In this case, the ROE
is at about 10.79%. That is about an average number for the current times. It started really high
around 68% in 1999 but then took a nosedive from 2001 to 2004 when the percentage went
negative.
Operating expense ratio shows the companys management by comparing their operating
expenses to their profit. In a well-managed company, the operating expenses should never
exceed or even come close to the total income. If it does, then the company wouldnt be making
a lot of money to stay in business. The ratio for this farm is 0.80:1 or 80%. That number is
currently showing that this section of their financial status is on the weaker side as well. A strong
number should be less than 65%.
Net Farm Income from Operations ratio shows how well a company can generate profit if
revenue decreases. This number is always best if it is lower. The Income Operations Ratio is at
0.14:1 or 14%. I can tell since this number is on the lower side that they are in good standing
here. It hasnt changed much throughout the years which is good. It was a little higher when they
were losing money in some years though.
I would make a couple recommendations to help them better run their farm. To get the
most out of their money, they could decide to use a method of farming called no till. This would
allow them to plant crops over previous crop stubble without working up the ground. This will
save them on fuel costs for the most part by not going over the fields more than they have to. He
spent nearly $65,000 on fuel; he could probably bring that down to at least $50,000.
Hiring people for labor isnt cheap. Everyone wants to make top dollar and work as little
as possible to earn it. Without a doubt, you need help on a farm and will have to employ people

to drive trucks during harvest season and other tractors to be efficient with time. However, you
can easily end up giving away unearned money to people if they are just standing around without
something to do. For example, if you are paying three guys at $15/hr and have to stand around
with them and then drive them to a field to work, you are losing money. You could have lost
nearly $25 but that adds up over time. Make sure that you keep them busy and if they arent and
theres nothing else to do for the day, send them home.
Also, if he doesnt already, he can turn off the insurance for the trucks and tractors that he
isnt using. Insurance is an important thing for his equipment, but it is not necessary if it is not
being used for long periods. Particularly in winter and spring times, you dont use the semitrucks and some tractors. By shutting off the insurance, you dont have to pay the expensive rates
if theyre sitting in the barn. Then when he decides its safe to use the machinery continuously,
then he can turn the insurance back on.
All in all, this farm is in pretty good standing. They arent in a situation where the bank
could foreclose on them at any minute. They could earn a little extra money and save it whenever
they can so they have some sitting for a just in case moment. It never hurts to have that extra
money since we never know when well need it.