Annals of the University of Oradea: Economic Science (Jul 2014)
FINANCIAL PERFORMANCE ANALYSIS AND BANKRUPTCY PREDICTION IN HUNGARIAN DAIRY SECTOR
Abstract
The main purpose of this study is to perform a comprehensive and comparing analysis of the most significant Hungarian-owned companies in the Hungarian dairy industry from financial point of view. It is demonstrated that the industry calls for strengthened focus because of the degree of concentration in the sector and the resulting sharp competition. The preliminary sample for the analysis is framed on the basis of three criteria: amount of the subscribed capital, sales revenues and product structure. Those companies are regarded as competitors that have subscribed capitals in excess of HUF 250 million, consistently high levels of sales revenues and diversified product structures. The preliminary sample consists of 7 companies. In 2012, their total sales revenues were as high as about 50% of the overall amount of sales revenues in the sector. Three of the 7 companies are possessed by foreign owners in full or part, whereas 4 of them belong to Hungarian owners. In 2012, Hungarian-owned companies covered more than one-third of the combined sales revenues of the 7 leading companies. Hence, the competitive positions of these 4 companies based on their financial positions are examined. These calculations have relied on the annual reports for the period of 2008–2012 (balance sheets, income statements, cash flow statements). The research has implemented a comprehensive and comparative financial analysis. The main question is what the key financial characteristics of the Hungarian-owned companies are. Financial indicators are calculated and their time-series analysis is accomplished to describe the sample companies’ capital structures, liquidity and profitability. Using comparative analysis of the applied financial ratios the study determines (1) which company has the most advantageous financial conditions for the successful operation; (2) which companies have disadvantageous financial situation; and (3) which companies are in potential financial distress situation. Potential bankruptcy positions are examined by the applications of Altman and Springate models.
