Dupont Analysis of Farms in V4 Countries

Abstract

The paper deals with the analysis of factors that influence the change in return on equity (ROE) in farms of individual V4 countries – in Slovakia, Poland, Hungary and the Czech Republic. DuPont analysis denotes the decomposition of the ROE indicator and is classified as a basic pyramid decomposition. The pyramid system captures the relationship between indicators, where one synthetic indicator (ROE) is broken down into analytical indicators through linkages. In the case of a multiplicative link between indicators, the functional and logarithmic method is used. The source of data is the Farm Accountancy Data Network for the period 2009–2017. Comparing the first and last year we can conclude that the ROE indicator decreased in farms of all V4 countries (in Slovakia by 155%, in Czech Republic by 133%, in Hungary by 52% and in Poland by 19%). The predominantly positive or negative impact on its development was mainly influenced by two indicators: return on assets and return on sales in all countries.

An analysis of factors affecting the profits of new firms in Spain: Evidence from the food industry

“…https://doi.org/10.17221/235/2021-AGRICECON Asset rotation as the proxy for efficiency also showed the importance of using assets efficiently in the first year. The positive effect of asset turnover on profitability was not surprising because, according to the DuPont analysis, ROA can be calculated as profit margin multiplied by asset turnover (Ladvenicová et al 2019). Considering that the market competition in the agri-food sector is strong (Grau and Reig 2021), new firms may reduce the profit margin of their products to promote sales.…”

Income and Asset Situation of Companies Producing Arable Crops in the Visegrad Countries

“…Fenyves et al [18], taking a different perspective, concluded that "the capital structure seemed to be strongly influenced by the farm structure and the relative company size". Subsequently, Ladvenicová et al [19] and Koszorús-Tarnóczi [20] focused their research on profitability indicators. The former found that return on assets and return on sales (ROA and ROS) have a pronounced effect on the fall in return on equity (ROE), while the latter found that ROA and ROE, as well as debt stock ratios, impacted the evolution of the market capitalization/equity ratio (as dependent variable) in regression analysis.…”

“…The equity to total assets ratio (Equation ( 4)) was used to examine the capital structure. The ROA and ROS indicators were applied similarly to previous works, such as Ladvenicová et al [19], Koszorús-Tarnóczi [20], Hamad-Tarnóczi [48], and Vavrina-Lacina [49], while the equity to total asset ratio was used in line with studies by Pille-Paradi [50] and Glushchenko et al [51].…”