DOI: 10.32725/978-80-7394-976-1.24

Financial ratios and profitability prediction

Daniel Kopta, Jana Lososová
University of South Bohemia in České Budějovice, Faculty of Economics, Department of Accounting and Finance, Studentská 13, 370 05 České Budějovice, Czech Republic, kopta@ef.jcz.cz.
University of South Bohemia in České Budějovice, Faculty of Economics, Department of Accounting and Finance, Studentská 13, 370 05 České Budějovice, Czech Republic, lososova@ef.jcu.cz


The presented article deals with the possibility of using financial ratio indicators to predict the profitability of agricultural enterprises. The Albertina database was used as a data source. A total of 701 agricultural enterprises were selected, with sales of more than one million crowns. Companies from the manufacturing industry were used for comparison. The correlation between the value of the financial ratio and the company's profitability in the following years was calculated. Spearman's correlation coefficient was used. Research shows that the success rate of agricultural enterprises is relatively stable. The correlation between ROA value and subsequent profitability is 0.41 to 0.48 (for year t+1). In the following years, the correlation decreases. These values are approximately 5 – 10 percentage points below the importance of the manufacturing industry. However, correlations can be increased by dividing businesses into categories of similar size or according to similar altitudes. The usability of other financial ratios is lower. The correlation between indebtedness and future profitability is approximately -0.25, and the correlation between liquidity and future profitability fluctuates around the value of 0.20. These values correspond to values from other industries as well. A significant difference is the usability of activity indicators. For manufacturing, correlation values range from 0.21 to 0.24, but for agricultural enterprises, the correlation is considerably lower. The reason is the high dependence of the indicator on the altitude and the production orientation of the agricultural enterprise.

Keywords: Agriculture, profitability, profitability prediction, corporate rating

pages: 157-164



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