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Abstract
Agricultural production is highly exposed to potential negative effects derived from a set of highly variable factors. Weather, biological, institutional, human, and market factors affect yields as well as input and product prices. These factors are responsible for the economic risk any firm must face, regardless how it is financed; they can cause huge losses in a short period of time. On the other hand, financial risk to the often uncertain possibility that farmers could not bear their financial obligations (payments of interests and principal), which may affect viability of the firm. Both economic and financial risks are intimately linked, since the feasibility of dealing with its financial obligations greatly depends upon the productive ability of the firm. Two complementary easy-to-apply commonly used methods for estimation of economic and financial risks are presented in this study. The first method analyzes the variability of both Return on Assets (ROA) and Return on Equity (ROE) measured within the firm through historical information. The second method analyzes the structure of costs and the financial structure of the firm, measured through the economic and the financial leverages, respectively.