Preventing insolvency of agricultural businesses

Kotormán, Annamária

Keywords: agriculture, businesses, liquidation, loss of assets, risk

Negative consequences of the liquidation of agricultural businesses affect large groups of the population. This paper analyses the causes of liquidation in 17 liquidated agricultural businesses in order to derive lessons which may help prevent and address insolvency in others.
Monitoring the company’s indices on quick liquidity, own equity ratio and indices of indebtedness can help prevent insolvency. It was also found that on the long term, agricultural operations cannot be conducted with a low level of own equity. Therefore any company established by the investors must have issued capital appropriate for the nature of the agricultural operations, as loans can only be used in addition to, and not instead of own funds. If a business is already in trouble, liquidation may be prevented if the crisis is identified in time and if the managers apply crisis management measures.

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