Abstract
The aim of this article is to analyse the short-term solvency of large companies in the wine sector in the period 2014-2018, in two relevant Spanish wine-production areas and assess significant differences in time and between regions. Liquidity is a direct threat to the financial health of companies and is analysed using standard financial indicators and compositional data, in order to prevent the common outlier, non-linearity and asymmetry problems in standard financial ratios. The study shows that the compositional ratios are statistically more adequate and that the turnover indicator between operating cash inflows with respect to current investments and operating cash outflows with respect to current liabilities is a complementary indicator to standard cash flow ratios. Wineries in La Rioja have better liquidity than Catalan wineries in the period under study.
Highlights
The survival of companies in the wine sector is linked to several variables including marketing and distribution channels (Alonso & Liu, 2012) and a balance between domestic sales and exports (Simon-Elorz et al, 2010)
Financial ratios computed from balance sheet or income statement figures are most commonly used for this purpose, the cash flow statement is a further key financial report to study short-term solvency, especially to assess liquidity, in other words, if the operating cash inflows exceed the operating cash outflows in the two differentiated wine-growing areas object of this study
Liquidity is a direct threat to financial health and can compromise the direct and indirect employability of the wine sector
Summary
The survival of companies in the wine sector is linked to several variables including marketing and distribution channels (Alonso & Liu, 2012) and a balance between domestic sales and exports (Simon-Elorz et al, 2010). The aim of this article is to present a novel approach to the analysis of liquidity in the wine sector, during a period of five years (2014-2018), in two relevant wine production areas with different characteristics in Spain, in order to assess the short-term solvency of companies. Financial ratios computed from balance sheet or income statement figures are most commonly used for this purpose, the cash flow statement is a further key financial report to study short-term solvency, especially to assess liquidity, in other words, if the operating cash inflows exceed the operating cash outflows in the two differentiated wine-growing areas object of this study. Cash flow from operating activity is reported to be a key determinant of firm survivability (Arimany-Serrat & Farreras-Noguer, 2020; Arimany-Serrat et al, 2016; Bresciani et al, 2016; Rondós Casas et al, 2018). There has been a long on-going debate about the quality of statistical analyses based on financial ratios
Sign-in/Register to view highlights & summary 
Published Version (
Free)
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call