Management Theory and Studies for Rural Business and Infrastructure Development, Volume 25

Financial structure of agricultural firms

Maire Nurmet


Recent years’ agri-policy developments have brought in structural changes in investment and financing in agriculture. The purpose of the paper is to examine the developments in agricultural firms’ financial structure, analysing trends in financing structure of Estonian agricultural firms in 1996–2008. The problem is, if sector’s higher debt level causes higher leverage on farm level, and does debt ratio having influence on farm profitability. The analysis is based on data of Estonian Statistics, and uses the method of financial ratio trend analysis. The results are presented on average enterprise basis. Results show that debt levels have increased gradually, without causing specific changes in debt-to-equity ratios. Net income is very floating and the volatility of the return on equity is high. In such a risky situation the agricultural firms should be careful in attracting additional debt capital.

JEL codes: Q320; Q140.

Keyword(s): agricultural firms, agricultural finance. financial structure

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Management Theory and Studies for Rural Business and Infrastructure Development eISSN 2345-0355

This journal is published under the terms of the Creative Commons Attribution-Noncommercial 3.0 Unported License. Responsible editor: Dr Audrius Gargasas.