Financial structure and value determination in the Estonian agricultural sector
2001
Nurmet, M. | Lemsalu, K. (Estonian Agricultural University, Tartu (Estonia). Inst. of Accounting and Finance)
Financial leverage in agricultural firms has been influenced by such factors as anticipated profit and risk level, interest charges, attitudes of entrepreneurs and lenders towards risk as well as the structural peculiarities of agricultural firms. Financial theories claim that financial leverage brings about an increase in the return on equity and its variability. The analysis of financial leverage is based on the assumption that the more fluctuations there are in the relative importance of loans in firm capital structure the more changes there are in the return on equity but also in the return on assets. The present article treats the possible scenarios about the growth in the return on equity or the determination of value in agricultural firms, farms in particular, through the changes in financial leverage, interest and tax rates
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