Financial Sustainability Evaluation and Forecasting Using the Markov Chain: The Case of the Wine Business

Nataliya Rekova, Hanna Telnova, Oleh Kachur, Iryna Golubkova, Tomas Baležentis and Dalia Streimikiene
Additional contact information
Nataliya Rekova: Donbass State Engineering Academy, 84300 Kramatorsk, Ukraine
Hanna Telnova: Donbass State Engineering Academy, 84300 Kramatorsk, Ukraine
Oleh Kachur: PJSC “Artwinery”, 84500 Bakhmut, Ukraine
Iryna Golubkova: Maritime Law and Management Faculty, National University “Odessa Maritime Academy”, 65000 Odessa, Ukraine
Dalia Streimikiene: Lithuanian Institute of Agrarian Economics, 03220 Vilnius, Lithuania

Sustainability, 2020, vol. 12, issue 15, 1-17

Abstract: This paper proposes a framework for assessing the financial sustainability of a wine producing company. The probabilistic approach is used to model the expected changes in the financial situation of an enterprise based on the historical trends. The case of an enterprise in Ukraine is considered as an illustration. The Markov chain is adopted for the forecasting exercise. Using the Markov chain framework allows one to predict the probability of financial security change for several periods ahead. The forecast relies on the transition probabilities obtained by exploiting the historical data. The proposed framework is implemented by construction of the financial security level transition matrices for three scenarios (optimistic, baseline and pessimistic). The case study of a Ukrainian wine producing company is considered. The possibilities for applying the proposed method in establishing anti-crisis financial strategy are discussed. The research shows how forecasting the financial security level of a company can serve in anti-crisis financial potential buildup.

Keywords: financial security; Markov chains; wine sector; forecasting; transition matrix (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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