A number of theories have been proposed for managing risks. However, the lack of standard measures of risk in the past have made it difficult for farmers to apply risk management strategies in their decision making process. Risk-rated farm enterprise budgets provide a method of measuring risks and comparing the riskness of various alternatives. The risk-rated approach to risk management is designed to deal with the ever present possibility of prices and yields less favorable than expected. Good decisions can result in losses even when risks are taken into consideration. However, the chances of making decisions that turn out to be profitable can be greatly improved by the evaluation of potential profits and risks among logical alternatives.