Financial Ratios as Indicators of Economic Sustainability: A Quantitative Analysis for Swiss Dairy Farms

In agriculture, a rising number of sustainability assessments are available that also comprise financial ratios. In a literature review of farm management textbooks, taking account of the differences between European and North American practices and considering prevalent sustainability assessment ap...

Full description

Saved in:
Bibliographic Details
Published inSustainability Vol. 10; no. 8; p. 2942
Main Authors Zorn, Alexander, Esteves, Michele, Baur, Ivo, Lips, Markus
Format Journal Article
LanguageEnglish
Published Basel MDPI AG 19.08.2018
Subjects
Agricultural economics
Agronomy
Correlation analysis
Dairy farms
Economics
Farm management
Financial ratios
Indicators
Liquidity
Literature reviews
Quantitative analysis
Sustainability
Sustainable agriculture
Online AccessGet full text

Cover

More Information
Summary:In agriculture, a rising number of sustainability assessments are available that also comprise financial ratios. In a literature review of farm management textbooks, taking account of the differences between European and North American practices and considering prevalent sustainability assessment approaches, we identified frequently used financial ratios. Five ratios relate to the indicator profitability and four to the indicator liquidity. Another eight financial indicators refer to the indicators financial efficiency, stability, solvency and repayment capacity. Based on more than 14,000 accountancies of dairy farms from the Swiss Farm Accountancy Data Network (FADN), we carried out a Spearman correlation analysis for normalised and harmonised financial ratios. The correlation analysis revealed mostly positive correlations. To assess the implementation of a quantitative economic sustainability assessment we compare an aggregated indicator compound of all 17 ratios with two selections of financial ratios–first, a compound European and, second, a compound North American economic sustainability indicator. The correlation between the complete and the reduced sets of indicators suggest that both aggregate economic indicators can be reasonably applied to estimate the economic sustainability for Swiss dairy farms.
ISSN:2071-1050
2071-1050
DOI:10.3390/su10082942