Financial Management on

Catfish Farms
 OVERVIEW OF INTENSIVE TRAINING MODULE:

Financial Management on
Catfish Farms to Improve
Efficiencies and
Profitability

Carole R. Engle
Aquaculture/Fisheries Center
University of Arkansas at Pine Bluff

SHORT & LONG-TERM

FINANCIAL DECISIONS:
 Can it generate enough value
over time to pay off the debts
(solvency)?
 Balance Sheets
 Is it profitable in the long run?
 Is it profitable in the short run?
 Can it generate enough cash
when needed to pay the bills
(liquid)?

Engle, UAPB

1
 Financial Analysis:
Key Statements
 Financial Position
 Balance Sheet
 Profitability
 Budgets
 Income Statement
Cash Flow/Liquidity
 Cash Flow Statement
Engle, UAPB

What are your

business goals
for 2011?
These need to be very
specific,
Need to be based on
thorough financial
analysis of business.
Engle, UAPB

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 WHAT DOES IT TAKE TO
SURVIVE THE LONG RUN?
Adequate financial strength:
-Is my financial position
strong enough?
-Do I have too much debt to
pull out of this?
ADEQUATE FINANCIAL STRENGTH
DETERMINED FROM THE BALANCE
SHEET
Engle, UAPB

ADEQUATE PROFITABILITY
Enterprise budgets can be
used to evaluate new
management strategies to
see what the effect on
profitability might be.

Income Statements measure

profits & losses in a specific
year.
Engle, UAPB

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 WHAT DOES IT TAKE TO
SURVIVE THE SHORT RUN?

•Must be able to sell fish at a

price that covers its variable
costs, not necessarily all its
total costs.
•Must have adequate liquidity.
•Enough cash revenue to make
payments when due.
•Must have adequate cash flow.
Engle, UAPB

Essential Financial
Management
• Extensive planning.
• Controlling: implementing
actions needed to meet goals.
• Monthly monitoring of
Cash flow statement -
 Deviations apparent.
 Corrective actions can be
taken more quickly.
Engle, UAPB

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 Balance Sheets:
a Management
Tool to Improve
Financial Position
of the Business
Carole R. Engle
Aquaculture/Fisheries Center
U. of Arkansas at Pine Bluff
Engle, UAPB

Financial Analysis:
Key Statements
 Financial Position
 Balance Sheet
 Profitability
 Budgets
 Income Statement
Cash Flow/Liquidity
 Cash Flow Statement
Engle, UAPB

5
 Short & long-term
financial decisions:
• Can it generate enough value
over time to pay off the debts
(solvency)?
– Balance Sheets
• Is it profitable in the long run?
• Is it profitable in the short run?
• Can it generate enough cash
when needed to pay the bills
(liquid)?

Engle, UAPB

Balance Sheets:

Financial statement
that measures
Financial Position
of the business.

Engle, UAPB

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 Balance Sheet:
What is its bottom
line?

Net Worth!!

Same as
Owner Equity!!

What is your
business worth?
Engle, UAPB

Balance Sheet:
Structure
Divided into:
•Assets
–What is “owned”
–Land, buildings
–Equipment
–Fish in ponds
•Liabilities
–What is “owed”
–Debts, loans, bills due at
supply store.

Engle, UAPB

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 Balance Sheet:
How is it organized?
Assets divided into:
•Current
–Cash
–Items to be sold this
year
•Non-current
–Items used in
production
–Equipment
–Ponds
Engle, UAPB

Balance Sheet:
Organization

Liabilities divided into

•Current
–Bills due this year
–Payments due this year
•Non-current
–Payments due after this
year, over next several
years

Engle, UAPB

8
 Balance Sheet for 256-acre
Catfish Farm, December 31.
Assets
Current Assets
Checking account $15,849

Value of small fish in ponds $266,112

Non-current Assets
Equipment $387,570

Total Assets $1,003,890

Not all assets listed here – not enough room; Check

the other training file for a complete balance sheet!
Engle, UAPB

Balance
Not all Sheet
liabilities listed herefor
– not256-acre
enough room;
Catfish
Check other Farm, December
training files for more!31.
Liabilities

Current Liabilities

Payment due this year on $72,368

equipment loan
Payment due this year on $38,216
pond construction loan
Non-current Liabilities

Principal remaining on $168,858

equipment loan
Total Liabilities $534,214
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9
 Balance Sheet for 256-acre
Catfish Farm, December 31.
Total Assets $1,285,851
Total Liabilities - $534,214
Net Worth = $751,637

•Net worth is positive.

•Business is solvent.
•If business were to be sold, are
enough assets to pay off claims
(liabilities)
•Over time, Net Worth should
grow, wealth grows.
Engle, UAPB

Financial Efficiency: Solvency

•Refers to the value of assets

owned by the business
compared to the amount of
liabilities owed.

•Indicates whether, if the

business were to be sold, if
there would be enough
capital to pay off the debts.
Engle, UAPB

10
 Financial Ratios that Measure Solvency
Ratio Interpretation
Change in net Positive change shows business growth
worth
Debt/asset Compares value of debt to assets.
ratio Smaller values better. Less than 1 means
solvency.
Equity/asset Part of total assets financed by owner’s
ratio equity. Higher values preferred.
Debt/equity Compares proportion of financing by
ratio lenders with that from owner. Lower
values preferred.

Debt structure Compares amount of debt due this year

ratio to total debt.
Engle, UAPB

Solvency Measures for the

256-acre Catfish Farm

Ratio Value
Change in net worth - $245,994

Debt/asset ratio 0.42

Equity/asset ratio 0.58

Debt/equity ratio 0.71

Debt structure ratio 0.21

Engle, UAPB

11
 Financial Efficiency: Liquidity
• Liquidity is the ability of a business to
meet cash flow obligations.
• It is important to keep financial
transactions of the business running
smoothly.

Engle, UAPB

Financial Ratios that Measure

Liquidity

Ratio Interpretation
Current ratio Quick indicator. The higher the value the
more liquid.
Working Difference between current assets and
capital current liabilities. In dollar values instead
of a ratio.

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 Liquidity Measures for the
256-acre Catfish Farm

Ratio Value
Current ratio 2.55

Working capital $171,377

Engle, UAPB

How Are These Calculated?

Spreadsheet Tutorials
are Available on this
site in another file.

Engle, UAPB

13
 Tutorials include:
• Exercise balance sheet, income
statement, cash flow budgets
• Correct versions, the financial
ratios, and
• A brief interpretation of each
ratio and how to improve.

Engle, UAPB

Carole R. Engle
Aquaculture/Fisheries Center
University of Arkansas at Pine Bluff

Engle, UAPB

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 One use of a balance sheet is to
answer the question of:

Engle, UAPB

Year 1
Assets- 277,287
current
Non-current 475,213
Total 752,500
Liabilities- 242,168
current
Non-current 179,079
Total 421,247
Net Worth
Debt/asset
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 Year 1
Assets- 277,287
current
Non-current 475,213
Total 752,500
Liabilities- 242,168
current
Non-current 179,079
Total 421,247
Net Worth 331,253
Debt/asset 0.56
Engle, UAPB

Year 1 Year 2
Assets- 277,287 217,868
current
Non-current 475,213
Total 752,500
Liabilities- 242,168
current
Non-current 179,079
Total 421,247
Net Worth 331,253
Debt/asset 0.56
Engle, UAPB

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 Year 1 Year 2
Assets- 277,287 217,868
current
Non-current 475,213 356,410
Total 752,500
Liabilities- 242,168
current
Non-current 179,079
Total 421,247
Net Worth 331,253
Debt/asset 0.56
Engle, UAPB

Year 1 Year 2
Assets- 277,287 217,868
current
Non-current 475,213 356,410
Total 752,500 574,278
Liabilities- 242,168
current
Non-current 179,079
Total 421,247
Net Worth 331,253
Debt/asset 0.56
Engle, UAPB

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 Year 1 Year 2
Assets- 277,287 217,868
current
Non-current 475,213 356,410
Total 752,500 574,278
Liabilities- 242,168 411,686
current
Non-current 179,079 179,079
Total 421,247
Net Worth 331,253
Debt/asset 0.56
Engle, UAPB

Year 1 Year 2
Assets- 277,287 217,868
current
Non-current 475,213 356,410
Total 752,500 574,278
Liabilities- 242,168 411,686
current
Non-current 179,079 179,079
Total 421,247 590,765
Net Worth 331,253
Debt/asset 0.56
Engle, UAPB

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 Year 1 Year 2
Assets- 277,287 217,868
current
Non-current 475,213 356,410
Total 752,500 574,278
Liabilities- 242,168 411,686
current
Non-current 179,079 179,079
Total 421,247 590,765
Net Worth 331,253 -16,487
Debt/asset 0.56 1.03
Engle, UAPB

 Catfish inventory=
can affect balance sheet,
net worth, and financial ratios.
 Pond inventory estimation not precise.
 Depletion method.
 Feeding response alone does not work well.
 Very careful monitoring of all stocking,
feeding, & harvesting with continuous
analysis can get close.
Engle, UAPB

19
  Experimental Trials: depletion
estimates by weight were within 0-8%
of actual and from 3.5-18% by number.
 Commercial Pond Trials (19 ponds): 1-
14% by weight and 0.3-2.4% by
number (only 2 ponds estimated
number).

Engle, UAPB

Evaluation of Trawl for Sampling &

Inventory Estimation in Catfish Ponds

Engle, UAPB

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 The Trawl

Engle, UAPB

Year 1
431-acre Assets- 181,000
Catfish current
Farm Non-current 1,643,855
Total 1,824,855
Liabilities- 159,725
current
Non-current 1,068,506
Total 1,228,231
Net Worth 596,624

Engle, UAPB

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 Year 1
431-acre Current ratio 1.13
Catfish
Farm Working Capital 21,275
Equity/asset ratio 0.33
Debt/asset ratio 0.67

Debt/equity ratio 2.06

Debt structure 0.13

Engle, UAPB

Year 1 Year 2
862-acre Assets- 181,000 362,000
current
Merged
Catfish Non-current 1,643,855 3,588,710

Farm Total 1,824,855 3,950,710

Liabilities- 159,725 221,552
current

Non-current 1,068,506 1,369,506

Total 1,228,231 1,591,058

Net Worth 596,624 239,652

Engle, UAPB

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 Year 1 Year 2
862-acre Current ratio 1.13 1.63
Merged
Catfish Working 21,275 140,448
Farm Capital
Equity/asset 0.33 0.60
ratio
Debt/asset 0.67 0.40
ratio
Debt/equity 2.06 0.67
ratio
Debt 0.13 0.14
structure
Engle, UAPB

Engle, UAPB

23
 Income
Statement
Carole R. Engle
Aquaculture/Fisheries Center
U. of Arkansas at Pine Bluff

Engle, UAPB

Short & long-term financial

decisions:
• Can it generate enough value
over time to pay off the debts
(solvency)?
– Balance Sheets
• Is it profitable in the long run?
• Is it profitable in the short run?
• Can it generate enough cash
when needed to pay the bills
(liquid)?

Engle, UAPB

24
 Profitability Measures
• Profitability = Total revenues -
total costs
• A business that is both solvent
and liquid will not necessarily
be profitable.

Engle, UAPB

Financial Analysis:
Key Statements
 Financial Position
 Balance Sheet
 Profitability
 Budgets
 Income Statement
Cash Flow/Liquidity
 Cash Flow Statement
Engle, UAPB

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 Income Statement (P&L)
Profit & Loss Statement

• Budget units can be a pond

• P & L for entire farm

Bottom line =
Net Farm Income

Engle, UAPB

Income Statement:
How is it structured?
Item Value
Revenue $806,400

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 Income Statement:
How is it structured?
Item Value
Revenue $806,400
Cash expenses $610,322

Engle, UAPB

Income Statement:
How is it structured?
Item Value
Revenue $806,400
Cash expenses $610,322
Depreciation $42,707

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27
 Income Statement:
How is it structured?
Item Value
Revenue $806,400
Cash expenses $610,322
Depreciation $42,707
Total operating $653,029
expenses

Engle, UAPB

Income Statement:
How is it structured?
Item Value
Revenue $806,400
Cash expenses $610,322
Depreciation $42,707
Total operating $653,029
expenses
Cash interest paid $150,579

Engle, UAPB

28
 Income Statement:
How is it structured?
Item Value
Revenue $806,400
Cash expenses $610,322
Depreciation $42,707
Total operating $653,029
expenses
Cash interest paid $150,579
Total expenses $803,608
Engle, UAPB

Income Statement:
How is it structured?
Item Value
Revenue $806,400
Cash expenses $610,322
Depreciation $42,707
Total operating expenses $653,029
Cash interest paid $150,579
Total expenses $803,608
Net farm income from $2,792
operations
Engle, UAPB

29
 Profitability Measures
• Primary measure of farm profitability is :
Net Farm Income
• Net Farm Income is a measure of the
return to operator’s equity, capital,
unpaid labor, and management.
• Net Farm Income can be distributed
among the four principal factors of
production: land, labor, capital, and
management
Engle, UAPB

Gross Revenue “Pie”

Payments to
suppliers for Rent to owner
feed, seed, for rented land
etc.

Interest to lenders Employee

for borrowed wages
money
NFI to operator for
unpaid labor, equity
capital, & management

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 Financial Indicators of How Much of
Net Farm Income is Earned by Each
Factor of Production
Ratio Interpretation
Return to labor Residual return to owner for labor &
& management management input

Return to labor Portion of NFI remaining after subtracting

out opportunity costs of capital &
management

Return to NFI remaining after subtracting costs of

management capital and labor

Engle, UAPB

Financial Indicators of How Much of

Net Farm Income is Earned by Each
Factor of Production

Ratio Interpretation
Rate of Return Can be compared to rates of return from
to Assets other investments. Independent of
financing.
Rate of Return Measures percent return to owner’s net
on Farm Equity worth or equity.
Operating Measures the proportion of gross
Profit Margin revenues left after paying expenses
Ratio (OPMR)

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 Financial Indicators from Income
Statement for the 256-acre Catfish Farm

Ratio Value
Return to labor & management $24,786

Return to labor $14,616

Return to management $10,140

ROA 10%

ROE -2%
OPMR 16%

Engle, UAPB

Spreadsheet Tutorials
are Available on this
site in another file.

Engle, UAPB

32
 Using Enterprise Budgets and
Income Statements to Improve
Efficiencies and Profitability
of Catfish Farms

Carole R. Engle
Aquaculture/Fisheries Center
University of Arkansas at Pine Bluff

Income Statement:
Cash-based Accounting
Item Value
Revenue $403,200
Cash expenses $610,322
Depreciation $42,707
Total operating expenses $653,029
Cash interest paid $150,579
Total expenses $803,608
Net farm income from - $400,408
operations
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 Income Statement:
Cash-based Accounting
Item 2010 2011

Revenue $403,200 $1,209,600

Cash expenses $610,322 $610,322

Depreciation $42,707 $42,707

Total operating $653,029 $653,029

expenses
Cash interest paid $150,579 $150,579

Total expenses $803,608 $803,608

Net farm income - $400,408 $405,992

Engle, UAPB

Income Statement:
Accrual-based Accounting
Item 2010 2011

Revenue $403,200 $1,209,600

Change in fish inventory $403,200 - $403,200

Total Farm Revenue $806,400 $806,400

Total operating expenses $653,029 $653,029

Cash interest paid $150,579 $150,579

Total expenses $803,608 $803,608

Net farm income $2,792 $2,792

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34
 What does it take to
survive the short run?
•Must be able to sell fish at a
price that covers its variable
costs, not necessarily all its
total costs.
•Must have adequate liquidity.
•Enough cash revenue to make
payments when due.
•Must have adequate cash flow.
Engle, UAPB

Fish Feed Prices

$450

$400

$350
$/ton

$300

$250

$200

$150

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Realities of $300/ton Feed
UAPB Base Budgets:
431-acre farm ($300/ton feed)
Farm Size Cost/ Cost/
VC TC
131-acre farm $0.63/lb $0.83/lb
256-acre farm $0.64/lb $0.79/lb
431-acre farm $0.64/lb $0.78/lb
1,007-acre farm $0.64/lb $0.78/lb

Engle, UAPB

Realities of $350/ton Feed

UAPB Base Budgets:
431-acre farm ($350/ton feed)
Farm Size Cost/ Cost/
VC TC
131-acre farm $0.69/lb $0.88/lb
256-acre farm $0.70/lb $0.85/lb
431-acre farm $0.70/lb $0.84/lb
1,007-acre farm $0.70/lb $0.83/lb

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36
Breakeven Prices (based on
budgets for 256-acre farm; $300/ton)
Above total cost $0.79
Above variable cost $0.64
Above cash costs $0.60
(no debt capital)
Above cash costs $0.65
(100% debt op. capital)
Above cash costs $0.70
(50% debt long-term, no land;
100% debt op. capital)

Engle, UAPB

What would happen with

different feed and catfish
prices?

To maximize profits:

At low fish prices, feed rates and

stocking rates would decrease.
At low feed prices, feed and
stocking rates would increase.
At high feed prices, feed and
stocking rates would decrease.
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37
Effects of Higher Fish Prices &
Higher Feed Prices

 Higher feed prices

$$$ Lower stocking & feeding

 Higher fish prices

$$$ Higher stocking & feeding

Engle, UAPB

Profit-maximizing stocking
densities at different fish &
feed prices.
9,000
8,000
7,000
6,000
5,000
fish/acre

4,000
3,000
2,000
1,000 $0.70/lb $0.75/lb $0.80/lb
0

$/ton

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38
 How low should you go?

 Model results dropped profit-

maximizing stocking rates to
5,000/ac at $0.60/lb.

 Farmers need to stock at rates that

ensure financial payments
are met.

Engle, UAPB

Fish grow faster at lower

densities.

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39
 Higher stocking rates produce higher
yields of smaller fish.

May June July August Sept. Oct.

Engle, UAPB

Densities need to stay within

a feasible range.
Difficult to get
good growth,
turnover 7,500/acre

Difficult to make
5,500/acre debt payments on
ponds

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40
 With High Feed Prices,
Essential to get as much
gain out of every pound
of feed as possible.

Engle, UAPB

Feed Prices, Economics,

& Profitability:
Feed Studies

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41
 Breakeven prices across farm
sizes, 2009 feed costs.
Farm size 32% protein 28% protein
($343/ton) ($322/ton)
BEP/VC BEP/TC BEP/VC BEP/TC

60-acre $0.67 $0.89 $0.65 $0.87

131-acre $0.68 $0.88 $0.66 $0.86
256-acre $0.69 $0.84 $0.67 $0.82
431-acre $0.69 $0.83 $0.67 $0.81
1,007-acre $0.69 $0.83 $0.67 $0.81

Engle, UAPB

Breakeven prices across farm

sizes, 2009 feed costs.
Farm size 32% protein 28% protein
($343/ton) ($322/ton)
BEP/VC BEP/TC BEP/VC BEP/TC

60-acre $0.67 $0.89 $0.65 $0.87

131-acre $0.68 $0.88 $0.66 $0.86
256-acre $0.69 $0.84 $0.67 $0.82
431-acre $0.69 $0.83 $0.67 $0.81
1,007-acre $0.69 $0.83 $0.67 $0.81

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42
 What About Every Other
Day Feeding?
UAPB study:
Yield of carryover fish was 757
lb/ac less when fed every other
day.

Feed fed was 4,778 lb/ac less.

Engle, UAPB

What About Every Other Day

Feeding?
Feed Net Net Net
cost benefit benefit Benefit
($0.65/lb) ($0.70/lb) ($0.75/lb)
$250/ton $106/ac $68/ac $30/ac
$275/ton $165/ac $127/ac $89/ac
$300/ton $225/ac $187/ac $149/ac
$325/ton $285/ac $247/ac $209/ac
$350/ton $344/ac $306/ac $268/ac

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 What’s the Down Side to
Every Other Day Feeding?
 Understocked fish grow
very poorly.
 Every other day feeding
better strategy for ponds
with fish that are closer to
market size.

Engle, UAPB

How do I look at my costs?

• Use the budget spreadsheets

included in the training materials.
• Need to have EXCEL installed on
your computer.
• Substitute your costs in and see
the change in the breakeven costs
and net returns.
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44
 THERE ARE EXERCISES
AVAILABLE ON THIS SITE IF
YOU WISH TO PRACTICE
WHAT YOU HAVE LEARNED
ABOUT INCOME
STATEMENTS BEFORE
MOVING ON TO THE LAST
SEGMENT IN THIS MODULE.

Engle, UAPB

Using Cash Flow

Budgets to Improve
Cash Flow & Liquidity in
the Catfish Business

Carole R. Engle
Aquaculture/Fisheries Center
U. of Arkansas at Pine Bluff

45
Overview of Structure
and Interpretation of
Cash Flow Budgets

Engle, UAPB

Short & long-term financial

decisions:
• Can it generate enough value
over time to pay off the debts
(solvency)?
– Balance Sheets
• Is it profitable in the long run?
• Is it profitable in the short run?
• Can it generate enough cash
when needed to pay the bills
(liquid)?

Engle, UAPB

46
 Financial Analysis:
Key Statements
 Financial Position
 Balance Sheet
 Profitability
 Budgets
 Income Statement
Cash Flow/Liquidity
 Cash Flow Statement
Engle, UAPB

Cash Flow Analysis: What Can

It Be Used For?

• Use it to develop a plan for adverse

conditions.
• Plan should consider budgeting
enough to be able to feed to obtain
adequate yields.
• Consider looking hard at fixed costs
as way to reduce overall costs.

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47
 Cash Flow Analysis: What Can
It Be Used For?

• Whether there is a liquidity problem

• Whether there is a cash shortfall in
particular months.
• Whether the business can make its
payments on time.
• What the cash position of the
business is.
• If the operating line of credit is
adequate or not

Engle, UAPB

Cash Flow Analysis:

What is the unit of analysis?

• Entire farm

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48
Cash Flow Analysis:
How Can It Help?

• Analyze pattern of cash flow

• Structure operating line of credit
• Credit & loan applications
• Decide on best timing for capital
purchases (equipment, land, etc.)
• Look to improve timing of
purchases of supplies, inputs

Engle, UAPB

Cash Flow Analysis: Structure

Item January February

Total cash inflow $611,090 $628,406

Total cash outflow $14,940 $50,848

Cash available $596,150 $577,548

New borrowing 0 0

Ending cash balance $596,150 $577,548

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49
Cash Flow Analysis: Sructure
Item January February

Beginning cash $578,834 $596,150

Total cash outflow $14,940 $50,848

Cash available $596,150 $577,548

New borrowing 0 0

Ending cash balance $596,150 $577,548

Engle, UAPB

Cash Flow Analysis:

Total Cash Inflow

Item January February

Beginning cash $578,834 $596,150

Receipts from $32,256 $32,256

catfish sold
Total cash inflow $611,090 $628,406

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Cash Flow Analysis:
Operating cash expenses

Item January February

Feed $2,783 $5,565

Fingerlings 0 $36,416

….. ….. …..

Total operating $14,940 $50,848

expenses
Engle, UAPB

Cash Flow Analysis: Debt Servicing

Item January February
Real estate loan
Principal 0 0
Interest 0 0
Equipment
Principal 0 0
Interest 0 0
Operating loan
Principal 0 0
Interest 0 0
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Cash Flow Analysis:
Summary of Debt Outstanding
Item January February

Real estate 0 0

Equipment 0 0

Operating 0 0

Engle, UAPB

Cash Flow Analysis with 50% of

catfish off-flavor and 30% financed.
Item July August

Total cash inflow $63,387 $50,320

Total cash $80,239 $99,766

outflow
Cash available - $16,852 - $49,446

New borrowing $26,852 $59,446

Ending cash $10,000 $10,000

balance
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52
 Cash Flow Analysis:
Summary of Debt Outstanding
Item July August

Real estate 0 0

Equipment 0 0

Operating $103,259 $145,340

Payments are made on operating line of credit in each of these

months because there is a lien on the fish sold.

Engle, UAPB

Liquidity Measures for

256-acre Catfish Farm
Ratio Interpretation
Interest Relates interest to firm’s ability to service
Coverage debt. How much of firm’s returns to
Ratio assets available per dollar of interest.
Higher ratios more favorable.
Cash Flow Extent that excess cash provides cushion
Coverage for covering debt-servicing. Higher ratios
Ratio more favorable.
Debt- Cash required for interest and principal
servicing payments. Lower ratios show lower debt
ratio burden.

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 Measures of Cash Flow Risk
for 256-acre Catfish Farm
Cash flow risk measure
Percent farm revenue can decline and still meet
cash flows

Percent farm expenses can increase and still

meet cash flows
Percent interest rates can increase and still meet
cash flows

Engle, UAPB

Liquidity Measures for

256-acre Catfish Farm
Ratio Value
Interest Coverage Ratio 0.14

Cash Flow Coverage Ratio 5.63

Debt-servicing ratio 0.18

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 Measures of Cash Flow Risk
for 256-acre Catfish Farm
Cash flow risk measure Value
Percent farm revenue can decline 0.45
and still meet cash flows

Percent farm expenses can 0.009

increase and still meet cash flows
Percent interest rates can 0.26
increase and still meet cash flows

Engle, UAPB

How Are These Calculated?

• The training materials include
spreadsheets with: exercise
balance sheet, income statement,
cash flow budgets
• The correct versions, the financial
ratios, &
• Includes a brief interpretation of
each ratio and how to
improve it.

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 Using Cash Flow
Budgets to Improve
Cash Flow and
Liquidity in the Catfish
Business
Carole R. Engle
Aquaculture/Fisheries Center
U. of Arkansas at Pine Bluff

Monthly Cash Flow Budget

Item Jan Feb Mar Apr May Jun Jul Aug Sep Oct
Beginning Cash 15,849.00 39.79 42,835.71 12,065.73 46,466.02 24,256.90 1,145.96 34,568.03 5,806.26 36,263.66
Receipts from catfish sold 60,000.00 60,000.00 60,000.00 60,000.00
Cash Inflow 15,849.00 60,039.79 42,835.71 72,065.73 46,466.02 24,256.90 61,145.96 34,568.03 65,806.26 36,263.66
Operating Cash Expenses
Fingerlings - - 12,415.00 - - - - - - -
Feed 3,830.00 4,790.00 5,750.00 6,710.00 7,670.00 8,620.00 10,540.00 11,500.00 14,370.00 9,580.00
Gas, Fuel, and Oil 380.00 470.00 570.00 660.00 750.00 850.00 1,040.00 1,130.00 1,410.00 940.00
Chemicals - - 470.00 - - 470.00 - 620.00 - -
Labor 1,000.00 1,000.00 1,730.00 1,730.00 1,730.00 1,950.00 1,950.00 1,950.00 1,950.00 1,730.00
Harvesting & Hauling 717.39 722.79 806.91 692.32 687.24 681.21 695.49 754.85 701.20 729.46
Machine Hire - - - - - 150.00 150.00 290.00 150.00 -
Office Expenses 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00
Rent 360.00 360.00 360.00 360.00 360.00 360.00 360.00 360.00 360.00 360.00
Repairs and Maintenance 1,310.00 1,310.00 1,310.00 1,310.00 1,310.00 1,310.00 1,310.00 1,310.00 1,310.00 1,310.00
Utilities 190.00 390.00 970.00 1,360.00 1,560.00 2,340.00 2,530.00 2,730.00 2,920.00 2,340.00
Other Operating Costs 360.00 360.00 360.00 360.00 360.00 360.00 360.00 360.00 360.00 360.00
Total Operating Expenses 8,157.39 9,412.79 24,751.91 13,192.32 14,437.24 17,101.21 18,945.49 21,014.85 23,541.20 17,359.46
Fixed Cash Expenses
Taxes and Insurance - - - 4,760.00 - - - - - -
Total Fixed cash Expenses - - - 4,760.00 - - - - - -
Living Expenses 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00
Other Expenses - - - - - - - - - -
Scheduled Debt Paym ents
Real Estate Principal 265.00 - - 265.00 - - 265.00 - - 265.00
Interest (10% APR) 2,368.75 - - 2,364.33 - - 2,357.71 - - 2,351.08
Equipment Principal - 665.00 - - 665.00 - - 665.00 - -
Interest (10% APR) - 2,108.23 - - 2,097.14 - - 2,080.52 - -
Operating Principal - - 1,000.00 - - 1,000.00 - - 1,000.00 -
Interest (10% APR) 2,018.07 2,018.07 2,018.07 2,018.07 2,009.73 2,009.73 2,009.73 2,001.40 2,001.40 2,001.40
Total Cash Outflow 15,809.21 17,204.08 30,769.98 25,599.72 22,209.11 23,110.94 26,577.93 28,761.77 29,542.60 24,976.94
Cash Available 39.79 42,835.71 12,065.73 46,466.02 24,256.90 1,145.96 34,568.03 5,806.26 36,263.66 11,286.72
New Borrow ing - - - - - - - - - -
Cash Balance 39.79 42,835.71 12,065.73 46,466.02 24,256.90 1,145.96 34,568.03 5,806.26 36,263.66 11,286.72

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56
 Cash Flow Scenarios

Farm A Farm B
Sept. $60,000 Feb. $60,000
Oct. $90,000 April $60,000
Nov. $60,000 July $60,000
Dec. $60,000 Sept. $60,000
Nov. $30,000

Engle, UAPB

Liquidity Measures for Two Scenarios

Indicator A B
Cash Flow Coverage (0.26) 0.17
Debt-Servicing 0.21 0.17
Cash avail./cash (0.02) 0.01
inflow
Cash avail./op. (0.03) 0.02
expenses
Cash avail./liabilities (0.01) 0.01

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Adequate Cash Flow:
Determined from Cash Flow Budget
• Cash flow budget must show realistic
projections of cash revenue for the year,
by month.
• Any month with a negative cash flow is a
cash flow problem that needs to be
resolved.
• Must identify a production/financial plan
that generates the revenue when needed.
• If there is a problem, may need to sell
off some stock, reduce densities,
allow for better growth = better cash
flow.

Engle, UAPB

• Decisions on stocking and

feeding rates should be
based on meeting short-term
financial obligations.

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 What should I look at this
winter?
• Do detailed cash flow budget and know
when you need to make payments.
• Using Fishy, project different harvest
dates at different stocking & feeding rates.
• Choose feeding and stocking rates that
allow farmer to make necessary
payments.

Engle, UAPB

Larger fish at stocking reach harvest in

shorter time period.

May June July August Sept. Oct.

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 Fish grow faster at lower
densities.

Engle, UAPB

Cash Flow Simulator:

Files available in
training materials on
web site.

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