Increasing the return on equity by financial leverage in sugar beet farms in Slovakia

Tomáš Rábek, Andrea Boháčiková, Ivan Holúbek, Zuzana Strápeková

Increasing the return on equity by financial leverage in sugar beet farms in Slovakia

Číslo: 1/2021
Periodikum: Potravinárstvo
DOI: 10.5219/1619

Klíčová slova: farm, sugar beet, profitability, indebtedness, financial leverage

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Anotace: The paper evaluates and analyses selected financial ratios of a set of farms in Slovakia in 2017. The farms are divided into two groups (sugar beet producers and sugar beet non-producers). The data used for the analysis were obtained from the National Bank of Slovakia (NBS) over the period 2009 – 2017 and the database of the Ministry of Agriculture and Rural Development of the Slovak Republic (MARD SR). Farmers generally achieve a low level of return on equity. In the paper, we analyze the development of interest rates and measure the potential effect of financial leverage, which can increase the profitability (return on equity) of the farms. Moreover, we test the statistically significant difference of selected ratios between the group of producers and non-producers of sugar beet in Slovakia. In 2017, the return on equity of sugar beet producers in Slovakia reached lower results in comparison to sugar beet non-producers. The differences in return on equity are explained by the lower level of equity per ha and thus higher indebtedness of non-producers of sugar beet.