Profitability determinants of small agricultural and food companies in the Republic of Serbia

Bearing in mind the importance of small agricultural and food companies for the production of agri-food products, but also bearing in mind their role of employer for a large number of workers, the aim of this research is to assess the profitability of these entities and consider the determinants that affect the business success of these companies. Therefore, the paper analyzes the determinants of profitability of small agricultural and food companies that operated in the Republic of Serbia from 2010 to 2019. Using the panel regression analysis, the influence of different microeconomic and macroeconomic determinants on profitability, measured by the rate of return on assets, was examined. The following indicators were observed as microeconomic determinants of profitability: liquidity, financial leverage, indebtedness, tangibility, total asset turnover, the fixed asset turnover ratio, current asset turnover ratio, inventory turnover ratio, receivables turnover ratio, and the sales growth rate. Indicators of the gross domestic product (GDP) and inflation were observed as macroeconomic determinants of profitability. Based on the research results, it was determined that the profitability of agricultural companies is significantly influenced by indebtedness, tangibility, the total asset turnover ratio, current asset turnover ratio, receivables turnover ratio, the GDP, and inflation. The profitability of food industry companies is significantly influenced by liquidity, indebtedness, tangibility, total asset turnover, the GDP, and inflation. The results of the research contribute to the quality of information available to all stakeholders in agribusiness, company managers, creditors, as well as agricultural policy makers.