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Sustainability 2018, 10(8), 2942; https://doi.org/10.3390/su10082942

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

1
Agroscope, Tänikon, 8356 Ettenhausen, Switzerland
2
École Polytechnique Fédérale, Station 2, 1015 Lausanne, Switzerland
*
Author to whom correspondence should be addressed.
Received: 28 June 2018 / Revised: 9 August 2018 / Accepted: 11 August 2018 / Published: 19 August 2018
(This article belongs to the Section Sustainable Agriculture, Food and Wildlife)
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Abstract

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. View Full-Text
Keywords: agriculture; sustainability assessment; indicator; accounting; financial ratio; farm management agriculture; sustainability assessment; indicator; accounting; financial ratio; farm management
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Zorn, A.; Esteves, M.; Baur, I.; Lips, M. Financial Ratios as Indicators of Economic Sustainability: A Quantitative Analysis for Swiss Dairy Farms. Sustainability 2018, 10, 2942.

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