Financial distress determinants: the survey of Lithuanian farms
2012
Stulpiniene, V., Aleksandras Stulginskis Univ., Akademija, Kauno reg. (Lithuania) | Alekneviciene, V., Aleksandras Stulginskis Univ., Akademija, Kauno reg. (Lithuania)
Farm financial distress can be determined by many factors. Farm failure can be the result of macroeconomic environment, unsuccessful farmer’s management decisions, and even natural forces. Different financial distress determinants may have different influence on a farm financial position. This study presents average financial ratios (leverage, return on assets, and return on equity) and single ratio of rental equivalent to gross margin according to farm size, land quality, economic size, farmer’s age and type of farming in Lithuania. The new approach to financial distress diagnosis requires classifying farms into financial positions. Considering average financial ratios and single ratio of rental equivalent to gross margin, farms were classified according to financial positions in order to estimate these methods’ suitability for financial distress diagnoses. Using study results, farmers can identify their position according to the average ratios. This study could be a guide for farmers making the financial management decisions.
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