African Journal of
Agricultural Research

  • Abbreviation: Afr. J. Agric. Res.
  • Language: English
  • ISSN: 1991-637X
  • DOI: 10.5897/AJAR
  • Start Year: 2006
  • Published Articles: 6578

Full Length Research Paper

Assessment of return on investment and sustainability of the business cycle in the meat processing sector in Italy

Mattia Iotti* and Giuseppe Bonazzi
      Department of Food Science, University of Parma, Via del Taglio 10, 43100 Parma, Italy.
Email: [email protected]

  •  Accepted: 11 September 2013
  •  Published: 17 October 2013


The meat processing sector is characterized by high capital requirement to finance investment in fixed assets and working capital. The firms in the sector finance with equity and debt these investments. For these firms, becomes then necessary to evaluate the return on capital and sustainability of the debt service. To achieve these aims, in the article are applied three approaches: the economic approach (accounting approach) applying ratios, the financial sustainability approach applying debt service coverage ratios, the financial approach applying evaluation. About this topic, in the article are shown some innovative approaches to the evaluation taking into account the cost of debt and the return of capital indices. The analysis is conducted on a sample of 65 firms operating in the meat processing sector in Italy, in a period of 10 years, with a total of 650 observations. The results of this work show that financial and accounting margins have different results and that there is not always financially sustainability even in presence of positive income results. The analysis however show a correlation between economic and financial values, but this correlation is not always statistically significant; at the same time, accounting and financial margins have statistically different results. In addition, a regression analysis is proposed explaining the return on capital employed (asset side approach) but this model has less explanatory value for return on equity capital (equity side approach); this is due to relevant level in the cost of debt in the sector and high level of taxation on profit.


Key words: Meat processing industry, net present value, coverage ratios, financial cycle.


JEL classification: Q13, Q14, G31.