PASSing the Financial Management Interest Exam

Effective financial management is essential to the success of any agricultural business. However, a problem often faced by Extension educators teaching financial management is getting, and keeping, the interest of meeting participants. The challenge for Extension educators is to identify ways to PASS the "interest exam" that is given, and graded, by Extension clientele who attend Extension meetings on financial management.

A financial management workshop conducted by Extension specialists at Purdue University did receive a PASSing grade from agricultural producers. The program, "Financial Management and Performance Assessment for Modern Agriculture," used data from a simple case study to illustrate the concepts and principles discussed. The presenters emphasized four features that helped them PASS the interest exam: Performance-based analysis, Action- oriented learning, Simple case study, and System of financial analysis.

Performance-based analysis uses financial and production performance measures that can be compared to either industry benchmarks or to the performance of agricultural businesses with similar operating characteristics. Data were presented from various sources to develop appropriate benchmarks for selected financial and production measures. Participants used the comparative data to identify strengths and weaknesses for the case farm and then suggested production, marketing, and financial alternatives for improving the financial performance.

Action-oriented learning is essential in today's fast-paced world. Agricultural producers simply do not sit for long periods of time and listen to lectures. Instead, they are, and like to be, active. The workshop used a case study approach to focus on the basic financial statements: balance sheet, income statement, statement of owner equity, and cash flow statement. The amount of time spent lecturing was limited to 30 minutes on each financial statement. For the remainder of the time, participants either completed the financial statements for the case study or discussed the answer key for the case study. Consequently, participants were actively involved throughout the entire workshop.

Simple case studies can often be more effective teaching tools than complex case studies, particularly when the main teaching points are establishing and understanding the relationships among financial statements and financial ratios. Participants can easily get bogged down in details when using complex case studies. The objective of the workshop was not to make participants accountants, but rather to facilitate their understanding of the information reported on financial statements and how to use that information to assess the strengths and weaknesses of an agricultural business.

System approaches are used throughout agriculture to evaluate performance, including financial performance. The DuPont Financial Analysis System was used to link production, financial, and marketing decisions to financial performance through financial ratios. Various production, financial, and marketing alternatives were identified for improving the financial performance of the case farm. The impact of each alternative was then assessed using the DuPont Financial Analysis System. Establishing the link between the production, financial, and marketing decisions and the impact on financial performance was essential for understanding the financial performance of the case farm.

The challenge of getting, and keeping, the interest of meeting participants will always be a challenge for Extension educators who present educational programs on financial management. However, the features discussed in this article helped this workshop PASS the "interest exam" and may prove useful to other Extension educators considering financial management workshops.