Assessing the Financial Health Status of Small Scale Poultry Businesses in Delta State, Nigeria

D E Idoge,C O Chukwuji

doi:10.5539/sar.v3n4p9

Abstract

<p>The study investigated the financial health status of small scale poultry businesses in Delta State, Nigeria using Altman’s Z-score model. The empirical study was undertaken to assess the solvency and hence future survivability of small scale poultry enterprises in the State. Financial data were extracted from three years (2010 – 2012) financial statements of 125 small scale poultry farms purposively selected from farms operating in the State and incorporated with the Nigerian Corporate Affairs Commission as limited liability agribusinesses. Descriptive statistics which include computed financial ratios, frequency distributions, percentages and tables were applied to analyze the content of the financial statements and Altman’s Z-scores’ were computed for each sampled farm for the three year period. The study shows that in 2010, 47.8 percent of farm enterprises had Z-scores between minus 0.60 to 1.55. In 2011 and 2012, 44.8 percent and 42.4 percent, respectively of the farms had Z-scores between negative 0.60 and 1.55. The study further indicates that 28 percent, 27 percent and 30.4 percent in 2010, 2011 and 2012, respectively, of the sampled farms had computed Z-scores between 2.64 and 4.79 farms. The study recommends the use of Altman’s Z-score by small scale investors as a technique for monitoring the financial health of their agribusinesses to prevent the ugly consequences of bankruptcy and liquidation.</p>

Highlights

1.1 Statement of ProblemPoultry Businesses small scale farms in Delta State Nigeria, continues to face undesirable levels of chronic vulnerability insolvency and liquidation
Financial data were extracted from three years (2010 – 2012) financial statements of 125 small scale poultry farms purposively selected from farms operating in the State and incorporated with the Nigerian Corporate Affairs Commission as limited liability agribusinesses
The data required for analyzing the financial health status of small scale poultry businesses in Delta State were collected for a three year period i.e. 2010, 2011 and 2012

Summary

Introduction

1.1 Statement of ProblemPoultry Businesses small scale farms in Delta State Nigeria, continues to face undesirable levels of chronic vulnerability insolvency and liquidation. The phenomenon has been due to unfavourable climatic conditions, economic shocks such as increasing prices of food and materials, high cost of labour, competition from inputs, poor market infrastructure, corruption and financial mismanagement. These conditions have adversely affected the ability of small scale farmers to cope and manage their farms in a sustainable manner. The increasing complexity of the situation, coupled with the decreasing ability of small scale poultry farmers to respond to shocks using their own resources and management skills, demands and heightened sophistication (breath, dept, and time) in deliberate assessment and analysis of the extent to which small scale poultry farmers can manage this complex set of risks and still maintain sound and healthy financial status to escape the dangers of corporate bankruptcy and failure. Altman’s z-score has been used to assess the financial health status of firms with the aim of signaling as early as possible warning signs of financial distress, to prevent, mitigate and respond to negative outcomes such as bankruptcy, liquidation or eventual failure using Altman’s z-score

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Conclusion