EFFICIENCY OF USE OF BORROWED CAPITAL IN LITHUANIAN AGRICULTURAL COMPANIES

Lina Martirosianiene

Abstract: Agriculture is an economy sector demanding big material resources for which modernization and further development investments are crucial. It provides additional competitive advantage and powerful tool for growth for the organizations and influences company financial status, business continuity and development. It is important to correctly choose such capital structure of the company which would minimize capital cost and increase value of the company. Borrowed capital helps to earn additional funds, i.e. undertaken financial risk can have positive effects on Return on Equity but investments are not always successful or become efficient. This article analyzes financial stability ratios of Lithuanian agricultural companies and evaluates the efficiency of use of borrowed capital. In order to evaluate the efficiency of use of borrowed capital the following relative financial indicators are used: Debt to Equity Ratio; Net Debt to EBITDA Ratio, Interest Bearing Loans to Debt Ratio, Return on Equity Ratio, and Financial Leverage Effect, which combines the risk of financial leverage and interest coverage with tax tariff

Keywords: borrowed capital, return on equity, efficiency, financial leverage effect, debt.

DOI: https://doi.org/10.15623/ijret.2017.0616002