Analysis of financial ratios of an intensive dairy enterprise: a case study in the mexican high plateau.

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Bibliographic Details
Title:	Analysis of financial ratios of an intensive dairy enterprise: a case study in the mexican high plateau.
Alternate Title:	Análisis de razones financieras en la empresa lechera intensiva: un estudio de caso en el altiplano mexicano.
Authors:	Valladares, Enrique Villegas¹, Dávalos Flores, José Luis²
Source:	Veterinaria México. ene-mar2005, Vol. 36 Issue 1, p25-40. 16p. 6 Charts, 9 Graphs.
Subjects:	DAIRY industry, DAIRY farms, FINANCIAL statements, CORPORATE profits, CORPORATE debt, AGRICULTURAL industries, BANKING industry
Abstract (English):	In a competitive environment intensified by globalization, profit margins tend to decrease. Therefore analyzing financial information becomes an important issue to make strategic decisions. The purpose of this research is, to contribute to build new references to compare and evaluate the performance of dairy firms. To achieve that purpose, and using a case study method, eight years of financial information of a dairy farm were analyzed. The farm selected is a company located in central Mexico that is vertically and horizontally integrated, and uses an intensive production system. There are 1,000 cows under milking production and the farm produces 40% of the forage they consume. Financial position and income statements were used to construct 22 financial ratios, and they were organized in four categories: liquidity, leverage, assets administration and profitability. This dairy agro-enterprise has short and long term solvency, which allows financing the farm's operations mostly with their own resources. The farm was forced to reduce its debt because of the 1994 Mexican crisis and a contraction of the banking system. The financial ratios of assets administration show that the firm finances its customers, but its suppliers do not finance the firm. The profitability indicators show very low ratios with a decreasing tendency that coincides with the implementation of the North American Free Trade Agreement. There is a need to generate historical financial information that could allow sector and size comparisons to make stronger conclusions. [ABSTRACT FROM AUTHOR]
Abstract (Spanish):	En un ambiente de competitividad intensificado por la globalización, los márgenes de utilidad tienden a decrecer. Esta circunstancia hace que el análisis de la información financiera tenga especial importancia para la toma de decisiones estratégicas. El propósito de esta investigación es contribuir a la construcción de nuevas referencias para comparar y evaluar el desempeño de empresas lecheras. Con el fin de alcanzar este propósito se utilizó el método de estudio de caso, a partir del análisis de ocho años de información financiera de una empresa lechera localizada en el centro de México, que está integrada vertical y horizontalmente, con un sistema de producción estabulado, mil vacas en línea y autosuficiencia forrajera de 40%. Se emplearon los estados financieros: Posición financiera y de resultados, y se construyeron 22 razones, agrupadas en cuatro categorías: liquidez, apalancamiento, administración de los activos y rentabilidad. Entre los principales resultados destacan que la empresa cuenta con capacidad de pago a corto y largo plazos, financia su operación principalmente con recursos propios, debido a que fue forzada a reducir su deuda como consecuencia de la crisis económica de México posterior a la devaluación del peso en 1994. Las razones que miden la administración de activos muestran que la empresa financia a sus clientes, pero sus proveedores no lo hacen con ella. Los indicadores de rentabilidad presentan razones bajas con tendencia decreciente, lo cual coincide con la implantación del Tratado de Libre Comercio para América del Norte. Al realizar el trabajo se detectó la necesidad de generar información histórica financiera, que permita hacer comparaciones por sector y tamaño para llegar a conclusiones contundentes. [ABSTRACT FROM AUTHOR]
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Database:	MedicLatina

Description
Abstract:	In a competitive environment intensified by globalization, profit margins tend to decrease. Therefore analyzing financial information becomes an important issue to make strategic decisions. The purpose of this research is, to contribute to build new references to compare and evaluate the performance of dairy firms. To achieve that purpose, and using a case study method, eight years of financial information of a dairy farm were analyzed. The farm selected is a company located in central Mexico that is vertically and horizontally integrated, and uses an intensive production system. There are 1,000 cows under milking production and the farm produces 40% of the forage they consume. Financial position and income statements were used to construct 22 financial ratios, and they were organized in four categories: liquidity, leverage, assets administration and profitability. This dairy agro-enterprise has short and long term solvency, which allows financing the farm's operations mostly with their own resources. The farm was forced to reduce its debt because of the 1994 Mexican crisis and a contraction of the banking system. The financial ratios of assets administration show that the firm finances its customers, but its suppliers do not finance the firm. The profitability indicators show very low ratios with a decreasing tendency that coincides with the implementation of the North American Free Trade Agreement. There is a need to generate historical financial information that could allow sector and size comparisons to make stronger conclusions. [ABSTRACT FROM AUTHOR]
ISSN:	03015092