Analysis of Selected Profitability Ratios in the Agricultural Sector

Analysis of Selected Profitability Ratios in the Agricultural Sector

Authors

DOI:

https://doi.org/10.7160/aol.2019.110301

How to Cite

Analysis of Selected Profitability Ratios in the Agricultural Sector. (2019). AGRIS on-Line Papers in Economics and Informatics, 11(3), 3-12. https://doi.org/10.7160/aol.2019.110301

Abstract

The paper deals with the analysis of selected profitability indicators of Czech agricultural businesses of legal entities and their subcomponents, based on DuPont analysis. The effect of asset turnover ratio, net profit margin ratio and equity multiplier on the value of return on equity (ROE) and return on assets (ROA) is studied in relation to the legal form and size group. The analysis of the effect of sub-indicators is performed by way of a correlation analysis. Furthermore, the assumption about the influence of sub-components indicators on synthetic profitability ratios is verified. The panel data set we used was obtained from the Amadeus database. The analytical section is based upon accounting statements of agricultural businesses of legal entities in the Czech Republic within the period of 2011 – 2015. The analysis is based on the calculated values of ROA and ROE, including partial values of the sub-components indicator, by using DuPont analysis. The differences between the groups of businesses are tested through correlation analysis and subsequently evaluated with respect to the specifics of each group. The object of examination was more than 3000 companies annually, on average. The evaluated companies were divided, in terms of legal form, into joint-stock companies, cooperatives and limited liability companies, and in terms of size structure into small, medium and large businesses.

References

Antony, J. P. and Bhattacharyya, S. (2010) "Measuring organizational performance and organizational excellence of SMEs – Part 1: A conceptual framework", Measuring Business Excellence, Vol. 14, No. 2, pp. 3-11. ISSN 1368-3047. DOI: https://doi.org/10.1108/13683041011047812

Anuar, H. and Chin, O. (2016) "The Development of Debt to Equity Ratio in Capital Structure Model: A Case of Micro Franchising", Procedia Economics and Finance, Vol. 35, pp. 274-280. ISSN 2212-5671. DOI: https://doi.org/10.1016/s2212-5671(16)00034-4

Aulová, R., Rumánková, L. and Ulman, M. (2013) "Determinants of the result of economic activity of agricultural businesses of legal entities in the Czech Republic", Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Vol. 61, No. 4, pp. 849-859. E-ISSN 2464-8310,ISSN 1211-8516. DOI: https://doi.org/10.11118/actaun201361040849

Brožová, I. and Beranová, M. (2017) "A comparative analysis of organic and conventional farming profitability", Agris On-line Papers in Economics and Informatics, Vol. 9, No. 1, pp. 3-15. ISSN 1804-1930. DOI: https://doi.org/10.7160/aol.2017.090101

Bumbescu, S. S. (2015) "Performance analysis in agriculture using Du Pont model", Alma Mater University journal, Alma Mater University Jornal of Sibiu, Vol. 8, No. 2, pp. 41-47.

Burja, V. and Mărginean, R. (2014) "The Study of Factors that may Influence the Performance by the Dupont Analysis in the Furniture Industry", Procedia Economics and Finance, Vol. 16, pp. 213–223. ISSN 2212-5671. DOI: https://doi.org/10.1016/S2212-5671(14)00794-1

Chang, K. J., Chichernea, D. C. and HassabElnaby, H. R. (2014) "On the DuPont analysis in the health care industry", Journal of Accounting and Public Policy, Vol. 33, No. 1, pp. 83-103. ISSN 0278-4254. DOI: https://doi.org/10.1016/j.jaccpubpol.2013.10.002

Chen, J. J. (2004) "Determinants of capital structure of Chinese-listed companies", Journal of Business Research, Vol. 57, No. 12, pp. 1341-1351. ISSN 0148-2963. DOI: https://doi.org/10.1016/S0148-2963(03)00070-5

Delcoure, N. (2007) "The determinants of capital structure in transitional economies", International Review of Economics and Finance, Vol. 16, No. 3, pp. 400-415. ISSN 1059-0560. DOI: https://doi.org/10.1016/j.iref.2005.03.005

Doorasamy, M. (2016) "Using DuPont analysis to assess the financial performance of the top 3 JSE listed companies in the food industry", Investment Management and Financial Innovations, Vol. 13, No. 2, pp. 29-44. E-ISSN 1812-9358, ISSN 1810-4967. DOI: https://doi.org/10.21511/imfi.13(2).2016.04

Fairfield, P. M. and Yohn, T. L. (2001) "Using asset turnover and profit margin to forecast changes in profitability", Review of Accounting Studies, Vol. 6, No. 4, pp. 371-385. E-ISSN 1573-7136, ISSN 1380-6653. DOI: https://doi.org/10.1023/A:1012430513430

Focsan, I. E., Miron, V. C. I. and Jeler (Popa), I. (2015) "Du Pont Analysis In The Production And Preservation Of Meat", Annals - Economy Series, Vol. 1, pp. 140-146.

Kaplan, R. S. and Norton, D. P. (2007) "Using the balanced scorecard as a strategic management system", Harvard Business Review. [Online]. Available: https://hbr.org/2007/07/using-the-balanced-scorecard-as-a-strategic-management-system [Accessed: 25 July 2019].

Kocisova, K., Gavurova, B. and Kotaskova, A. (2018) "A slack-based measure of agricultural efficiency in the European Union countries, Journal of International Studies, Vol. 11, No. 1, pp. 189-200. E-ISSN 2306-3483, ISSN 2071-8330. DOI: https://doi.org/10.14254/2071-8330.2018/11-1/14

Král, B., Wagner, J. and Stránský, J. (2006) "Vývojové tendence v systémech řízení výkonnosti" (In Czech), Český finanční a účetní časopis, Vol. 1, No. 3, pp. 33-42. ISSN 1802-2200. DOI: https://doi.org/10.18267/j.cfuc.176

Liesz, T. J. (2004) "Really Modified DuPont Analysis: Five Ways to Improve Return on Equity", The Economics Review. [Online]. Available: http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.610.5026&rep=rep1&type=pdf [Accessed: 22 July 2019].

Lososová, J. and Zdeněk, R. (2014) "Key factors affecting the profitability of farms in the Czech Republic", Agris On-line Papers in Economics and Informatics, Vol. 6, No. 1, pp. 1-16. ISSN 1804-1930.

Machek, O. and Špička, J. (2014) "Productivity and profitability of the Czech agricultural sector after the economic crisis", WSEAS Transactions on Business and Economics. [Online]. Available: http://www.wseas.org/multimedia/journals/economics/2014/a265707-083.pdf [Accessed: 20 July 2019].

Mishra, A. K., Harris, J. M., Erickson, K. W. Hallahan, Ch. and Detre, J. D. (2012) "Drivers of agricultural profitability in the USA: An application of the Du Pont expansion method", Agricultural Finance Review. Vol. 72 No. 3, pp. 325-340. ISSN 0002-1466. DOI: https://doi.org/10.1108/00021461211277213

Náglová, Z. and Horáková, T. (2016) “Influence of Qualitative Factors on Quantitative Determinants in the Czech Meat Industry Economy", AGRIS on-line Papers in Economics and Informatics, Vol. 8, No. 4, pp. 111-123. ISSN 1804-1930. DOI: https://doi.org/10.7160/aol.2016.080410

Novotná, M. and Svoboda, J. (2010) "Application of a system of indices to an analysis of agricultural holdings economy in the LFA regions", Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Vol. 58, No. 3, pp. 165-174. E-ISSN 2464-8310, ISSN 1211-8516. DOI: https://doi.org/10.11118/actaun201058030165

Novotná, M. and Volek, T. (2015) “Efficiency of Production Factors and Financial Performance of Agricultural Enterprises”, AGRIS on-line Papers in Economics and Informatics, Vol. 7, No. 4, pp. 91 - 99. ISSN 1804-1930.

Rajan, R. G. and Zingales, L. (1995) "What Do We Know about Capital Structure? Some Evidence from International Data", The Journal of Finance, Vol. 50, No. 1, pp. 1421-1460. E-ISSN 1540-6261. DOI: https://doi.org/10.1111/j.1540-6261.1995.tb05184.x

Reiff, M., Surmanová, K., Balcerzak, A. P. and Pietrzak, M. B. (2016) "Multiple Criteria Analysis of European Union Agriculture", Journal of International Studies, Vol. 9, No. 3, pp. 62-74. E-ISSN 2306-3483, ISSN 2071-8330. DOI: https://doi.org/10.14254/2071-8330.2016/9-3/5

Sardana, G. D. (2008) "Measuring business performance: A conceptual framework with focus on improvement", Performance Improvement, Vol. 47, No. 7, pp. 31-40. E-ISSN 1930-8272. DOI: https://doi.org/10.1002/pfi.20014

Schader, C., Baumgart, L, Landert, J., Muller, A., Ssebunya, B., Blockeel, J., Weisshaidinger, R., Petrasek, R., Mészáros, D., Padel, S., Gerrad, C. Smith, L. Lindenthal, T., Niggli, U. and Stolze, M.(2016) "Using the Sustainability Monitoring and Assessment Routine (SMART) for the systematic analysis of trade-offs and synergies between sustainability dimensions and themes at farm level", Sustainability, Vol. 8, No. 3, pp. 274. ISSN 2071-1050. DOI: https://doi.org/10.3390/su8030274

Sheela, S. C. and Karthikeyan, K. (2012) "Financial Performance of Pharmaceutical Industry in India using DuPont Analysis", European Journal of Business and Management, Vol. 4, No. 14.E-ISSN 2222-2839, ISSN 2222-1905.

Soliman, M. T. (2003) "Using Industry-Adjusted DuPont Analysis to Predict Future Profitability, SSRN Electronic Journal. 48 p. ISSN 1556-5068. DOI: https://doi.org/10.2139/ssrn.456700

Soliman, M. T. (2008) "The Use of DuPont Analysis by Market Participants", The Accounting Review, Vol. 83, No. 3, pp. 823-853. E-ISSN 1558-7967, ISSN 0001-4826. DOI 10.2308/accr.2008.83.3.823.

Song, H. (2005) "Capital structure determinants An empirical study of Swedish companies", CESIS Working Paper Series in Economics and Institutions of Innovation, [Online]. Available: http://www.diva-portal.org/smash/record.jsf?pid=diva2%3A565199&dswid=-6302 [Accessed: 20 July 2019]. 25 p

Ssebunya, B. R. Schader, Ch., Baumgart, L., Landert, J., Altenbuchner, Ch., Schmid, E. and Stolze, Matthias (2019) "Sustainability Performance of Certified and Non-certified Smallholder Coffee Farms in Uganda", Ecological Economics. Vol. 156, pp. 35-47. ISSN 0921-8009. DOI: https://doi.org/10.1016/j.ecolecon.2018.09.004

Střeleček, F. and Zdeněk, R. (2018) "Importance of objective and formal adequacy for the indicators of enterprise financial health", Agricultural Economics - Czech, Vol. 50, pp. 543-551. DOI: https://doi.org/10.17221/5246-agricecon

Uyar, A. and Guzelyurt, M. K. (2015) "Impact of firm characteristics on capital structure choice of Turkish SMEs", Managerial Finance, Vol. 41, No. 3, pp. 286-300. ISSN 0307-4358. DOI: https://doi.org/10.1108/MF-01-2014-0016

Vastola, A., Zdruli, P., D´Amico, M., Pasppalardo, G., Viccaro, M., DiNapoli F., Cozzi, M. and Romano, S. (2017) "A comparative multidimensional evaluation of conservation agriculture systems: A case study from a Mediterranean area of Southern Italy", Land Use Policy. Vol. 68, pp. 326-333. ISSN 0264-8377. DOI: https://doi.org/10.1016/j.landusepol.2017.07.034

Vítková, E. and Semenova, T. (2015) "The Impact of Key Parameters Change on Economic Development of the Company", Procedia Computer Science, Vol. 6, pp. 744-749. ISSN 1877-0509. DOI: https://doi.org/10.1016/j.procs.2015.08.605

Wagner, J. (2011) "Měření výkonnosti - vývojové tendence 2. poloviny 20. století" (Performance Measurement - Developing Tendencies of the Second Half of the 20th Century) (In Czech), Politická ekonomie, Vol. 2011, No. 6, pp. 775-793. E-ISSN 2336-8225, ISSN 0032-3233. DOI: https://doi.org/10.18267/j.polek.821

Weill, L. (2004) "What determines leverage in transition countries?", Czech Journal of Economics and Finance (Finance a uver), Vol. 54, No. 5-6, pages 234-242. ISSN 0015-1920.