Ratios Analysis For Cooperatives

United States Department of Agriculture Rural Business– Cooperative Service RBS Research Report 175

Financial Management and Ratio Analysis for Cooperative Enterprises

Abstract

This study discusses differences in financial management and goals between the investor-oriented firms and cooperatives. It briefly reviews what bankers look for when appraising potential borrowers. A summary of standard financial ratios used to analyze a variety of business structures is included, along with other modified ratios to address deficiencies evident in standard ratios. Key words: Cooperatives, fin n i l r t o l q i i y, l v r g , a t v t p o a i i y. a c a a i , i u d t e e a e c i i y, r fit b l t

Financial Management and Ratio Analysis For Cooperative Enterprises David S. Chesnick Rural Business-Cooperative Service U.S. Department of Agriculture Research Report 175 January 2000 Price: Domestic — $5.00 Foreign — $5.50

Preface

Several unique financial characteristics differentiate a cooperative from an investor-oriented firm (IOF). When evaluating the cooperative’s performance, comparing a coope a i e financial position with an IOF can be misleading for those unfamiliar with r t v ’s these characteristics. This report was written to help boards and managers assess the financial performance of their cooperatives and to familiarize potential creditors with the unique financial characteristics and performance of cooperatives. This study discusses the differences in financial management and goals of cooperatives versus IOFs. It starts by discussing the contents of the various cooperative financial statements and follows with a view of common sizing statements for analysis. Next, it reviews the usefulness of standard financial ratios applied to the cooperative framework. A brief review shows what lenders look for when analyzing potential borrowers. Finally,financial ratios are developed to build on these standards with an eye toward a comprehensive understanding of a cooperative s...