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The report is going to analyze the financial statement for the cooperative purposes for a Local Agricultural cooperative. The local agricultural cooperative plays a leading role in ensuring a constant supply of goods and services for their customers in the rural communities. The cooperatives are important assets to the community, as they offer employment opportunity and pay a property tax of an average of $43,000 annually.

The cooperatives’ financial statement contains a balance sheet, statement of operation, statement of changes in equity and cash flows. These may be accompanied by an explanation that details the financial statements. In general, the study is going to be focused on the balance sheet, statement of income and financial ratios that are going to be derived from the financial statement. Analyzing the cooperatives that majorly handle the farm supplies for the years 1994/1995, there were 42 percent that were dealing only on farm supplies, 16 percent were dealing on mixed supplies and 18 percent were dealing on marketing only. The cooperatives were grouped into sizes ranging from small to the super sized ones. Below is a table of the sizes and types of definitions that were used in the respondent cooperatives:

The farm supply cooperative definition shows a different result from the earlier reports, since the cooperative has a 100 percent of farm supplies sales rather than 90 to 100 percent sales.

A report analysis of the balance sheet provides examples of the levels of assets, liabilities and equities for the different types and sizes of the cooperatives for the year 1995. Each of the accounts is listed as a percentage of the total assets, as shown below:

Beyond the levels of assets and liabilities, there was a need of a comparative measure for the evaluation of the cooperatives financial performance. The standard financial ratio analysis used provided a comparison of performances over the years in different cooperatives.

Liquidity ratios

The ratios such as current and quick ratios provided a measure of the capability of the cooperatives to meet its short-term obligations.

Current ratio 

This is for each of the components of the current assets.

If the ratio becomes less than one, then a conclusion is drawn that the current liabilities exceed the current assets, and thus result in a threat to the cooperatives’ liquidity. A higher ratio favors the financial conditions for the cooperatives, since it shows that there is a capability of paying the current liabilities if the current assets are converted into cash. Additionally, high ratios increase a freedom of operation.  

Quick ratio=

The inventory assets are excluded since they are the least of the current assets. In financial terms, the high ratio as observed for the elements to be increasing shows little dependence on the inventory assets to meet the obligations of the cooperatives. This is shown below:

Profitability ratios

This ratio shows the efficiency in the cooperative operations. The gross profit margin becomes an important ratio of operation, since it dictates the pricing policy of the cooperatives and the costs of goods in for sale.

Gross profit margin =

For the cooperatives, they indicated a gross profit margin of 9.94 percent in 1995 compared to 10.76 percent for 1993. This indicates that the gross profit margin is in a reducing trend with an increasing cooperative sale.

Gross profit margin

The studied local cooperatives indicated that they had a strong financial statement. There was an increase of assets by 17 percent from 1994 to 1995, and the net sales grew by 8 percent. The agricultural cooperatives have continued to be part of important roles of ensuring a supply of goods and services to farmers, including marketing of their produce. A build up of inventories and increase in short-term debts becomes a major concern of the financial statement. The inventory assets and additional debts used to finance certain assets had an effect on the financial ratio analysis.

Code: Sample20

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