Competitiveness of the EU dairy industry

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Competitiveness of the EU dairy industry

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Figure 6.7 shows how different class size of enterprises finances their

growth investment. Generally, most size class firms have average debt-asset ratio

less than one which indicates their growth financing behaviour incline towards

internal source. However, this ratio decline as we go from micro to large

enterprises indicating that larger firms finance their growth from internal finance

compared to smaller firms.

Figure 6.7 Average capital structure of different sized classes of dairy

processing enterprises

Based on the classification of size classes by country the highest average

debt-asset ratio can be found among micro-enterprises operating in the UK, followed

by the Dutch medium-sized enterprises. The debt-asset ratios of UK micro-enterprises

and Dutch medium enterprises are greater than one, which

implies that micro-sized class enterprises in UK (above 1) and medium sized in

the Netherlands tend to finance their investment more from external sources.

These two classes sizes of the respective countries are more vulnerable compared

to other size classes of enterprises.

The current asset ratio is important because if the firm is not able to meet

its short-term liability the company is not in a healthy status. We use the current

ratio to analyse current asset, which relates the current asset to current liability.

A current ratio of less than one suggests that the company is unable to pay its

current liability. Hence, the current ratio should be at least greater than one and

as high as possible. Accordingly, the Netherlands has the highest average current

ratio, followed by the UK, Italy, Germany and France (figure 6.8). Poland is

the lowest in average current ratio. Across size classes the average current ra-

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