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I am concluding that Frederick is the better farmer/businessman. When comparing the financials of the two farmers, Frederick’s consistently demonstrated higher production per acre of land allotted him. Ivan ended up with higher net income and more assets at the end of the year, but when calculated into common terms was actually less productive overall.
Finding of Facts.
Since the two farmers were not given equal plots, in order to make them comparable a common factor must be used in their analyses. In order to put both Ivan and Frederick in common terms, acres of land were used as the common denominator.
Ivan: At the end of the year Ivan’s net income was 214 bushels of wheat. After determining net income of 214 bushels, I divided that by the 20 acres that he was allotted to determine that he produced 10.7 bushels per acre. Ivan’s operating expenses per acre and total expenses per acre were $0.35 and $1.45 respectively. Ivan’s balance sheet depicted a 318% positive change from the beginning of the year to the end; however, if that is demonstrated in terms of percent change per acre for comparability Ivan has an increase of 15.9% per acre. His balance sheet also shows his assets and liabilities to be 259 bushels and total 12.95 stated as bushels per acre. On top of this, Ivan still owes Feyador 3 bushels for his plow.
Frederick: At the end of the year Frederick’s net income totaled 119 bushels–significantly less than Ivan’s net income because of the land allotment differences. Frederick produced a net income of 11.9 bushels per acre, a favorable difference of 11% over Ivan’s 10.7. His operating expenses per acre and total expenses per acre were $0.50 and $1.60, which is higher than Ivan’s largely due to the fixed costs of the plow and ox. Frederick’s gross margin per acre is 12.4 bushels compared to Ivan’s 11.05 bushels, a difference of 12.2%. Frederick’sbalance sheet total of 143 bushels is also less when looking at the raw data. However, when the two balance sheets are compared using change (from the beginning of the year to the end) per acre, Frederick’s assets totaled 14.3 increase in bushels per acre whereas Ivan’s total increase was 12.95 bushels per acre–a difference of 10.4%. On top of this, Frederick was able to maintain strong financial standing without incurring debt to Feyador for his plow.
An alternative (and the more obvious) way to examine the data would be to look at the raw figures. I believe this is a less sophisticated approach since the two men were given different amounts of equity and land to begin the year. If taking this approach of looking at raw data, Ivan is clearly the better farmer since he ended up with higher net income and more assets at the end of the year.