The Haazle family operate a cropping farm business in the Central Region of Zambia.

The area of the farm has an estimated value of K 9,500,000.

Details for the rotation are shown in table 1.

Table 1.

Crop		Soy beans	Maize	Sunflower	Cassava
Hectares		160	320	160	160
Yield/ha	tonnes	3.0	4.5	2.5	10.5
Price/tonne	K	4,000	2,500	4,500	1,200
Variable costs/ha.	K	5,980	6,000	4,280	5,260

You have been employed as a Farm Management Consultant to carry out an economic analysis of their farm business.

The analyses are conducted at the beginning of year.

Apart from gross income form cropping they also have an income of K 20,000.

The fixed costs for the farming business are:

Owner operators allowance K 1,800,000

Administrative costs K 1,000,000

Depreciation of depreciable assets K 144,000

Interest paid on a bank loan of K 2,000,000 is K 260,000.

Question 4.

Construct an expected closing balance sheet for the business.

The land value will be the same as that which is shown in the opening balance sheet.

Check to make sure that the increase in equity obtained by subtracting the difference between the closing equity from the equity at the start of the year is the same as that calculated in question 1.

Next, calculate the efficiency percentage and gearing ratio for the business.

Finally, write a brief account about the expected health of the Haazeles farming business.

(5 Marks).