"So You're in the Cattle Business:...

[Sir Loin]

Here is a site you might find helpful if you are considering becoming an LLC partnership or S-corporation or simply want to gain knowledge.
Go: http://www.investorwords.com/
And while you are there, or anywhere else, could you please find me the definition of "Returns on Assets"
Thanks
SL

 

[msscamp]

The definition of Return on Assets (ROA):

http://beginnersinvest.about.com/cs/inv ... nasset.htm

 

[Sir Loin]

SL And while you are there, or anywhere else, could you please find me the definition of "Returns on Assets"
The definition of Return on Assets (ROA):

http://beginnersinvest.about.com/cs/inv ... nasset.htm

OH, there's my problem, I'm not a beginner, experienced investor use "return on investment". OK. Now using your site, what is the definition of "return on investment"?
Thanks.
SL

 

[msscamp]

SL And while you are there, or anywhere else, could you please find me the definition of "Returns on Assets"
The definition of Return on Assets (ROA):

http://beginnersinvest.about.com/cs/inv ... nasset.htm

OH, there's my problem, I'm not a beginner, experienced investor use "return on investment". OK. Now using your site, what is the definition of "return on investment"?
Thanks.
SL

You know what SL? I'm over your smart assed, superior attitude. Excuse me for trying to help, and find it your own damn self! :roll: If you weren't so arrogant you'd realize you can't INVEST if you don't have any ASSETS.

 

[Sir Loin]

What the he11 tripped your trigger? All I'm doing is trying to understand what the man is saying because he is using terminologies I never heard used this way before.
Is this something new?
IMO, there's a difference between "return on assets" and "return on investments" and I'm simply trying to find out what it is.

Now check this out.

Return On Assets – ROA
An indicator of how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings. Calculated by dividing a company's annual earnings by its total assets, ROA is displayed as a percentage. Sometimes this is referred to as "return on investment".

Now plug in "return on investment" and you don't find a definition. Why?
Source: http://www.investopedia.com/terms/r/returnonassets.asp

Now go to: http://www.investorwords.com/4250/Retur ... tment.html
Which I have been using for years and never had a problem.

Return on Investment
Definition 1

ROI. A measure of a corporation's profitability, equal to a fiscal year's income divided by common stock and preferred stock equity plus long-term debt. ROI measures how effectively the firm uses its capital to generate profit; the higher the ROI, the better.

Definition 2

More generally, the income that an investment provides in a year.

Return on Assets
Definition

ROA. A measure of a company's profitability, equal to a fiscal year's earnings divided by its total assets, expressed as a percentage.

Are the two synonymous? Or not? I think not!
So what definition do I use for "return on asset" so I can understand what Prevatt is talking about.

Re:

you'd realize you can't INVEST if you don't have any ASSETS

Not true, lots of companies and individual invest with out assets. Have you never heard of an unsecured personal loan? No down payment car loan? To rent or lease?
There are thousands of ways to invest with no assets.
Which is one of the reasons I question his use of "Return on assets" instead of "return on investment".

Have a nice mother's day. :heart:
SL

 

[allinnow]

I read the article from Mr. Prevatt and thought it was overkill for a majority of ranchers in our country. It is useful for some of the larger corporate ranches around the country but for most ranchers including me it made me dream of the day when I will be large enough to have a use for the different ratios in his report. Currently I plan on only using the ROA ratio.

I am not incorporated and do not plan to be in the near future mainly because many of the advantages of forming a corporation were forfeited when Sarbanes Oxley was enacted. If the government wanted to prove some kind of fraud after a business went bankrupt it is easy given the new Sarbanes Oxley laws. I have had to give up stocker ranch clients because they refused to supply explanations as to their inventory levels, and I did not want to explain to an IRS auditor how those levels just automatically increase or decrease without invoices or receipts. Therefore why incorporate when ultimately an owner's personal assets may be forfeited even if his/her business is incorporated.

Be careful out there many CPA's will still encourage business owners to incorporate even though they have no idea how Sarbanes will be interpreted but from what I have seen and read it does not look good for owners, their personal assets are being attached to pay corporate debts. My advice is if you are not making a substantial profit you do not need to incorporate and keep very detailed records of purchases and sales of livestock.

REMEMBER EVEN IF YOU DID INCORPORATE YOUR PERSONAL ASSETS CAN BE TAKEN TO PAY CORPORATE BILLS IF FRAUD OR EVEN CERTAIN TYPES OF NEGLEGENCE CAN BE SHOWN.

 

[msscamp]

What the he11 tripped your trigger? All I'm doing is trying to understand what the man is saying because he is using terminologies I never heard used this way before.
Is this something new?

Sorry, I thought you were being smug and a smart aleck again. I'm not sure why I have so much trouble reading your posts right, but I do. I suspect it's me, and therefore my problem, but I'm not sure what to do about it. You do seem to have a talent for punching my buttons and, again, that is my fault for allowing it to happen. I promise I'm not as psychotic as I appear sometimes. :roll:

IMO, there's a difference between "return on assets" and "return on investments" and I'm simply trying to find out what it is.

There isn't, and to make sure of that I asked my boss(who is a CPA and has been in the business for a lot of years). Return on assets and return on investment is the same thing, just can be different scenarios. Usually assets(namely cash) are reinvested in the business in question - although it can be invested in a different venture or business - hence, I think, the term 'return on investment'.

Now check this out.

Return On Assets – ROA
An indicator of how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings. Calculated by dividing a company's annual earnings by its total assets, ROA is displayed as a percentage. Sometimes this is referred to as "return on investment".

Now plug in "return on investment" and you don't find a definition. Why?
Source: http://www.investopedia.com/terms/r/returnonassets.asp

I suspect because they are the same thing, and the Generally Accepted Accounting Methods prefers to define them as what they are - assets. I'm not sure, though. I just checked my accounting textbook from a semester or two ago and, while it does give a definition for 'Rate of Return on Investment', it also states ' or Rate of Return on Assets', and gives pretty much the same formula for figuring it. That is, you divide income from operations by invested assets to get a percentage.

Now go to: http://www.investorwords.com/4250/Retur ... tment.html
Which I have been using for years and never had a problem.

Return on Investment
Definition 1

ROI. A measure of a corporation's profitability, equal to a fiscal year's income divided by common stock and preferred stock equity plus long-term debt. ROI measures how effectively the firm uses its capital to generate profit; the higher the ROI, the better.

Definition 2

More generally, the income that an investment provides in a year.

Return on Assets
Definition

ROA. A measure of a company's profitability, equal to a fiscal year's earnings divided by its total assets, expressed as a percentage.

Are the two synonymous? Or not? I think not!

Wait a minute. Selling stock - both common and preferred - is just one means of how a corporation raises money. It's no different than manufacturing a product and selling it, except if the product doesn't sell no one wants to buy stock.

So what definition do I use for "return on asset" so I can understand what Prevatt is talking about.

Who is Prevatt? If I could figure out which definition is his, I might be able to help you - or ask my boss to explain it to me, and I could then (hopefully) explain what he/she said to you. Lest you think I work for some strange person, I work for a married couple - both of whom are CPA's. :lol: :lol:

Re:

you'd realize you can't INVEST if you don't have any ASSETS

Not true, lots of companies and individual invest with out assets. Have you never heard of an unsecured personal loan? No down payment car loan? To rent or lease?
There are thousands of ways to invest with no assets.
Which is one of the reasons I question his use of "Return on assets" instead of "return on investment".

Ok, valid point and I stand corrected. Sounds like a good way to lose your butt if you don't know what you're doing, though! :lol: :lol:

Have a nice mother's day. :heart:
SL

Thank you. I am sorry I misinterpreted your answer, and unloaded on you.

 

[Brute 23]

Katherine
Re:

There is a whole lot more to it than that.

Either you're in for the money, and therefore you are a business and should be incorporated, or you are in it for some other personal reason other then making money.

SL

If I incorporate, I get to pay taxes twice - once for my corporation and again for the salary I draw from that corporation. I don't think so.

You can also loose your personal property when things go bad. Where as if you own the land and lease it to your cattle corp. ,,, when something goes bad you shut the corp. down and start over because you still have your land.

 

[msscamp]

Katherine
Re:

There is a whole lot more to it than that.

Either you're in for the money, and therefore you are a business and should be incorporated, or you are in it for some other personal reason other then making money.

SL

If I incorporate, I get to pay taxes twice - once for my corporation and again for the salary I draw from that corporation. I don't think so.

You can also loose your personal property when things go bad. Where as if you own the land and lease it to your cattle corp. ,,, when something goes bad you shut the corp. down and start over because you still have your land.

I can do the same thing as another entity, without the double taxation.

 

[Brandonm2]

Katherine
Re:

There is a whole lot more to it than that.

Either you're in for the money, and therefore you are a business and should be incorporated, or you are in it for some other personal reason other then making money.

SL

If I incorporate, I get to pay taxes twice - once for my corporation and again for the salary I draw from that corporation. I don't think so.

You can also loose your personal property when things go bad. Where as if you own the land and lease it to your cattle corp. ,,, when something goes bad you shut the corp. down and start over because you still have your land.

I don't disagree but the land is the biggest risk in a cattle enterprise. Some kid gets in there and crash's his 4 wheeler or drowns in your stock pond or fall out your hay barn or the authorities find marijuana growing from a pot hanging in your pine tree they ain't sueing the LLC that owns the cows, they are suing the landowner because the land is more valuable than the silly cows and don't die or suddenly disappear. Putting everything BUT the land in an LLC sorta defeats the purpose of having the LLC.