Assessment of financial sustainability and risk of bankruptcy of agricultural enterprises in Bulgaria

Abstract

The diagnostics of financial sustainability of economic subjects and the risk of bankruptcy constantly attract the attention of economists. For these purposes, a number of financial indicators have been studied and threshold values were set, above and below which the probability of bankruptcy is considered significant. The agricultural sector is an invariable field for the realization of such studies, because it is seen as highly risky due to the action of many external and internal critical factors whose influence may lead to insolvency. The present research aims to evaluate the applicability of some of the most commonly used models for analyzing financial sustainability in the agricultural sector by using financial reports over a five-year period of a representative excerpt of large and middle-sized Bulgarian firms in the agricultural sector. Crop and livestock farms have been analyzed as separate subsectors in order to determine whether the applied methods for analysis of the financial sustainability show their specifics depending on the character of their particular activity. In parallel, the authors have studied the dependency between financial health and innovative activity and proved that the higher level of digitalization presupposes better financial sustainability and reduces the risk of bankruptcy.