Financial structure of agricultural firms

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.