Comparable analysis of financial ratios of farms and impact of subsidies on them in the European Union countries

Abstract

Financial ratios of the EU countries' farms, their comparative analysis and interpretation from the financial management point of view, the impact of subsidies on financial situation of farms are presented in the article. The research was carried out for the first time. The novelty is both in the methodology (due to the specific methodology of financial ratios calculation and limitations of the FADN data), and in the empirical research. The research aim is to evaluate and compare financial ratios in the EU countries' farms and to estimate the impact of subsidies on them. Research results showed a very large spread of the values of financial ratios. The authors presented maximum and minimum values of financial ratios, compared financial ratios of Lithuanian farms with the average ratios in the EU farms and the Baltic States farms, and presented possible reasons of financial ratios values. The sensitivity analysis of financial ratios to subsidies was done to estimate the impact of subsidies on financial ratios of farms in the EU countries. Research results are valuable for farms of different EU countries in the managing of finance, and the EU institutions when forming the policy of the EU support for agriculture and assessing the efficiency of this support.