EFFICIENCY OF BORROWED CAPITAL IN LATVIAN AGRICULTURAL HOLDINGS

Abstract

The rapid development of economy in general and agricultural sector in particular has been succeeded by recession. The increased price of input factors, the decrease in sales volume (total output) and cut of state subsidies is an important challenge for Latvian agricultural holdings. Obtained credits is the easiest solution and the most popular way to additional business financing. Nevertheless this strategy is leading to the essential credit risk and encreased leverage, which influences the agricultural holding’s growth through its effect on the expected return to equity capital. The objective of this research is to study and to evaluate the financial advantage of borrowed capital and determine its’ impact on efficiency of Latvian agricultural holdings, grouped by ESU and types of farming. The main source of quantitative information for authors’ calculations is data obtained from EU FADN national liaison agency in Latvia.