Implications for the financing and sustainability of enterprises based on a ranking methodology for categorical financial data

Abstract

The aim of the study is to present the implications for the financing and sustainability of enterprises based on a ranking methodology for categorical financial data.

Design/methodology/approach – Taking advantage of the optimal scaling properties of correspondence analysis (CA), a ranking‐clustering procedure is proposed. The proposed method was applied to categorical financial variables (i.e family farm income, gross profit, gross income, labour income and profitability) collected from a stratified random sampling of 80 Greek pig farms using a structured questionnaire.

Findings – The cluster analysis revealed three distinct groups of pig farms. Several recommendations for managerial practices and financial development resulted from this study. For the farms belonging to cluster C1, that present low rankings on both criteria, a development planning process must be applied that will focus on organizational and management issues. For the farms belonging to cluster C2, that present low rankings on the “composite income” criterion, policy measures have to be undertaken, aiming at exploiting their own production coefficients, reducing fixed costs and increasing productivity. Finally, for the farms in cluster C3, that present high scores on both ranking criteria, it is recommended to take actions that will improve their competitiveness.

Research limitations/implications – The findings are limited to five selected financial variables. Therefore, future studies in the same or other business fields would benefit from incorporating a greater number of variables.

Originality/value – The proposed methodological scheme could be useful to practitioners and academics, due to the fact that limited studies have dealt with this ranking problem, particularly in relation to the Greek agricultural business environment.