Financial sustainability analysis of agri-food firms improving ICRS with an NFP repayment approach

The Interest Coverage Ratios (ICRs) are ratios that are applied in various situations of life of the company; these ratios enable to evaluate the payment of the cost of debt and therefore are useful for the assessment of the sustainability of the business cycle and are used as covenants in financing transactions. The objective of this study is to expand the traditional methodology of calculation of ICRs following the recent development of the ICRs calculated by applying the financial approach and then develop ICRs to quantify the ability to repay financial debt (NPF_EICRs and NFP_FICRs). The ratios proposed in the research are applied on a sample of agri-food firms in Italy; in fact, agri-food firms often have high capital intensity. The evaluation of sustainable management is particularly important in particular to test the ability of repayment of the debt. The analysis showed that ICRs and FICRs are not always correlated with ratios NPF_EICRs and NFP_FICRs. This result shows that the assessment of sustainability of management, carried out with traditional ICRs can be integrated effectively with the ratios proposed in the study, particularly with the aim to evaluate firms’ ability to repay the debt. The research can be further developed by analyzing in other sectors, firms characterized by lower capital intensity to determine whether the obtained results could be confirmed in such firms.