XXIV EuAWE 2017
7A
Bologna Conference
Management of working capital cycle for the wine firms: sustainability assessment of the business cycle Giuseppe BONAZZI*, Mattia IOTTI** *University of Parma, Department of Veterinary Medicine; ** University of Parma, Department of Engineering and Architecture
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[email protected] In the last decade, the general economic crisis has altered both the business management strategies, as consumer habits, in the sector of the wine. Firms have had to face a reduction in credit access capacity, given the financial crisis. In addition, firms have had to cope with increases in the payment extensions granted to customers and requests for terms of supplier reductions payment. These dynamics have affected small and medium-sized enterprises, which are characterized by a lower bargaining power, both in relations with financial intermediaries, as in the market relationships. Even the inventories management has relevance to the reduction of access to credit and the need to contain the unsold. The paper aims to analyze the policies for managing the working capital cycle (operating receivables, inventories, operating payables), in companies operating in wine sector. The working capital cycle, in fact, impacts on the profitability and sustainability of the business cycle because it is related to company profitability and company's ability to pay the cost of debt. The companies of the wine sector, in fact, operate often with a positive net working capital cycle, with liquidity absorption due to the operational management, and with consequent need to finance the cycle of operations. The research analyzes a sample of 100 firms in the sector, operating in northern Italy, by analysis of a series of 5-year annual account data, for a total of 500 observations, on the basis of public company data. The account data have been reclassified to calculate the average length of the working capital cycle and to calculate the profitability and sustainability of the operations indexes. In the paper are then calculated indexes to verify the sustainability of the business cycle, including the interest coverage ratio (ICRs); ICRs are calculated according to economic and financial approach. The paper, by using multiple regression models, evaluates the effect of the working capital cycle on the profitability and sustainability of the management cycle. The paper has, as expected result, to deepen the analysis of the effects on working capital management in order to make available information about the risk parameters of management. The goal of the work is to show management practices to reduce the risk of insolvency of companies in the wine industry. The paper could be developed by expanding the reference sample to improve the statistical significance of the applied model. The work could be deepened with analysis of enterprises samples characterized by homogeneity of products, to produce results targeted to single groups of firms operating in niche markets. Keywords: Italian wine firm, net working capital, interest coverage ratio JEL-Code: G32 7a_bonazzi_iotti.docx
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