University of Wisconsin Center for Cooperatives

Financial Characteristics of Wisconsin Farm Supply Cooperatives, 1966-1977

By W.A. Dahl, Director of the Bureau of Economics and Market Development, Marketing Division, Wisconsin Department of Agriculture, Trade and Consumer Protection; he was an assistant Professor in the Department of Agricultural Economics at the University of Wisconsin-River Falls when this study was conducted.
W.D. Dobson, Professor and Chairman, Department of Agricultural Economics, University of Wisconsin, Madison.
D.H. Veium, Graduate Assistant in the Department of Agricultural Economics, University of Wisconsin, Madison at the time the study was conducted.

UWCC Occasional Paper No. 4 - December, 1980


Financial support for this research was provided by UW-Madison and UW-River Falls Cooperative Research Project 027 and Hatch Project 1975. The assistance of boards of directors and managers of Wisconsin farm supply cooperatives in providing data for this study is gratefully acknowledged. Helpful comments on the manuscript were obtained from Professor Frank Groves, Director of the University Center for Cooperatives, and Dr. Thomas Paterson.   

Summary

This paper contains benchmark figures which farmer-members, boards of directors and managers of Wisconsin farm supply cooperatives can employ to evaluate the performance of their cooperatives. The paper also identifies trends in the financial data generated by Wisconsin farm supply cooperatives during 1966-1977. Some trends and implications of the trends for management of the cooperatives are as follows:

* (1) Sales became more concentrated in the hands of the larger Wisconsin farm supply cooperatives during 1966-1977. Group 4 cooperatives (firms with annual sales of $3.0 million or more) accounted for 49% of the sales made by all Wisconsin farm supply cooperatives in 1977, up from 44% in 1966. The percentage of sales accounted for by the smallest Group 1 cooperatives (firms with annual sales of less than $1.0 million) declined from 10% of the total in 1966 to 7% of the total in 1977.

* (2) Wisconsin farm supply cooperatives generally recorded real increases in assets, net worth, sales, and net savings during 1966-1977. However, the real (deflated to remove the effects of inflation) growth of these variables was substantially lower than the nominal (not adjusted to eliminate effects of inflation) growth. This underscores the need for management to examine real growth figures to obtain a less distorted picture of the growth of their cooperatives.

* (3) Fixed assets of the average Wisconsin farm supply cooperative declined from 29% of total assets in 1966 to 23% of total assets in 1977. The average Group 1 cooperative actually recorded a decline in real fixed assets during 1966-1977. This reduction in investment in fixed facilities suggests that the cooperatives may need to embark on new investment programs if they are to remain competitive and develop the capacity needed to make further real increases in sales.

* (4) Wisconsin farm supply cooperatives replaced a substantial amount of equity capital with short-term debt during 1966-1977. This change presumably was welcomed by farmer-members who need capital for their farm businesses. However, short-term debt may be an expensive replacement for the equity capital.

* (5) Smaller Wisconsin farm supply cooperatives, in particular, have larger than average percentages of their current assets tied up in accounts receivable. Moreover, these smaller firms also had the highest accounts receivable delinquency ratios and bad debt losses during 1973-1977. The accounts receivable delinquency ratios of the larger cooperatives increased during 1973-1977. These results suggest that managers of all Wisconsin farm supply cooperatives may need to carefully monitor their accounts receivable.

* (6) Wisconsin farm supply cooperatives used less debt capital than other farm supply firms located throughout the U.S. during 1966-1977. The smaller cooperatives, in particular, might generate greater net savings if they increased use of financial leverage.

* (7) Except for the largest cooperatives, the net sales/working capital ratios of Wisconsin farm supply cooperatives were less than those for other farm supply businesses in the U.S. during 1966-1977. Managers of small and medium-sized cooperatives might increase net savings if they obtained a more rapid rate of working capital turnover.

* (8) The smaller farm supply cooperatives get a relatively large share of their savings in the form of patronage refunds from other cooperatives, chiefly affiliated regional cooperatives. This development may limit the decision making capacity of the smaller cooperatives.

* (9) The larger Wisconsin farm supply cooperatives generally recorded strong financial performances during 1966-1977. However, the market share figures, asset share figures, efficiency ratios, real asset growth figures and other figures all suggest that the smaller Group 1 cooperatives are not doing as well financially as the larger firms. This may foreshadow problems for the smaller cooperatives in the years ahead. It also may call for changes in management strategies for these firms, perhaps including mergers with the larger farm supply cooperatives.


Introduction

This paper contains figures describing the financial characteristics of Wisconsin farm supply cooperatives for 1966-1977. The main objective of the paper is to present benchmark figures which members, managers and directors of cooperatives could employ to assess the performance of their cooperatives and identify areas within their cooperatives which may require attention. The paper also gives management of the cooperatives and researchers information needed to review trends which have affected Wisconsin farm supply cooperatives in recent years.

Limitations regarding the usefulness of the figures should be recognized. First, the averages reported in the paper conceal variation in the financial figures for individual cooperatives. To a degree, this problem was corrected in the study by grouping the cooperatives into different size categories on the basis of sales. Secondly, the averages appearing in the paper do not necessarily define an optimally-run firm. Consequently, a cooperative which generated financial figures similar to the average for firms in its size category may not have employed optimal or near optimal financial management practices. Therefore, cooperatives desiring a more complete reading on their financial performance might compare their financial figures to the averages appearing in the paper for other firm size categories, the all cooperative averages, the Robert Morris Associates figures as well as the averages for the group to which they belong.1 Finally, figures such as those appearing ln the paper become dated. Thus, they will not reflect the effects on the cooperatives of recent developments such as the high interest rates of early 1980.

This study relies upon information drawn from the population of Wisconsin farm supply cooperatives. For purposes of the study, a farm supply cooperative was defined as a firm with 50 percent or more of its sales in one or more of the following products: livestock feed, seed, fertilizer, hardware items, bulk gasoline, and petroleum products. The classification system employed in the study placed cooperatives with annual sales of less than $1.0 million in Group 1, those with annual sales of $1.0 to $2.0 million in Group 2, those with annual sales of $2.0 million to $3.0 million in Group 3, and those with sales of more than $3.0 million in Group 4.

A cooperative was assigned to a particular group based upon average annual sales from 1966 to 1972 and from 1973 to 1977. For example, if a cooperative's yearly sales averaged $2.0 to S3.0 million during 1966-1972 it was placed in Group 3 for this period; if the cooperative's average annual sales increased to more than $3.0 million for 1973-1977, it was classified in Group 4 for all years in the latter period. It should be recognized that since the sales figures used for classifying the firms were in nominal (unadjusted for inflation) terms, an upward bias regarding classification of the firms into the different groups may have occurred.

That is, firms placed in Group 3 for 1966-1972 may have been reclassified into group 4 for 1973-1977 sorely because they sold the same quantity of products for higher prices. This possible bias should be kept in mind when comparing figures for the different size classifications.

The tables which follow have been arranged to permit a systematic review of the basic accounting and financial information for the cooperatives. In particular:

I. Changes in the number, sales and assets of Wisconsin farm supply cooperatives during 1966-1977 are described in Tables 1 and 2.

II. Nominal (unadjusted for inflation) and real (adjusted to remove effects of inflation) balance sheets and operating statements for the average Wisconsin farm supply cooperatives for 1966 and 1977 appear in Tables 3 and 4. Nominal and real figures for 1966 and 1977 which were extracted from the balance sheets and operating statements for average cooperatives in the different size categories are included in Tables 5 and 6.

III. Information relating to the current assets of Wisconsin farm supply cooperatives appears in Tables 7 through 13. These tables contain figures describing changes in accounts receivable, aging schedules for accounts receivable and bad debt losses for the cooperatives.

IV. Solvency ratios for Wisconsin farm supply cooperatives for 1966 through 1977 are listed in Table 12.

V. Efficiency ratios for Wisconsin farm supply cooperatives (sales to working capital and saving to sales ratios) appear in Tables 13 and 14.

VI. Profitability ratios for the Wisconsin farm supply cooperatives, including figures describing returns on assets, net savings, investment and patronage refunds, appear in Tables 15 and 16.

Many of the tables are self-explanatory. However, brief descriptions and interpretations of figures in the tables appear in the remainder of the paper.

I. Changes in the Size, Number, Sales and Assets of Wisconsin Farm Supply Cooperatives, 1966-1977

The number of Wisconsin farm supply cooperatives declined from 189 in 1966 to 169 in 1977, an 11% decrease (Table 1). This can be partially accounted for by the bankruptcy of two cooperatives and the change in sales specialities which caused 17 of the firms to no longer fit the definition of a farm supply cooperative used in this study. The majority of the firms which no longer met the definition of a farm supply business were smaller Group 1 and Group 2 cooperatives. Of the larger cooperatives which no longer met the definition, a few changed their specialty to some aspect of dairy product marketing or processing. 
Table 1. Number of Wisconsin Farm Supply Cooperatives in Sales Groups 1, 2, 3 and 4
  
                                       Number of Cooperatives
                                           in Size Group

 Group      Annual Sales             1966  Percent  1977  Percent
    
  1     Less than $1,000,000           49   25.93    34    20.12

  2     $1,000,000 to $2,000,000       58   30.69    55    32.54

  3     $2,000,000 to $3,000,000       41   21.69    40    23.67

  4     More than $3,000,000           41   21.69    40    23.67
---------------------------------------------------------------- 
       Total                          189  100.00   169   100.00

The larger cooperatives increased their share of the total sales and assets of Wisconsin farm supply cooperatives during 1966-1977 (Table 2). Group 4 cooperatives, for example, accounted for 49% of the sales in 1977 (up from 441 in 1966) and accounted for 46. of the total assets in 1977 (up from 39% in 1966). The percentage of sales and assets accounted for by the Group 1 firms declined from about 10% in 1966 to 7% in 1977. The decline in the percentage of sales and assets accounted for by the smaller Group 1 cooperatives reflects the fact that some of these firms lost business, some went bankrupt, others left the farm supply business to begin other specialities and others moved into larger size categories. The share of sales of the intermediate-size Group 2 and Group 3 cooperatives remained fairly constant during 1966-1977, but their share of the assets declined 2% to 3%.


Table 2: Percent of Total Sales and Total Assets
Accounted for by Cooperatives in Sales Groups 1, 2, 3 and 4
    
                    Percent of Total    Percent of Total
                         Sales                Assets
Cooperative           1966     1977       1966     1977
  Group
   1                  9.74     6.81       9.15     6.61
   2                 17.33    16.56      19.37    17.53
   3                 28.89    27.68      32.40    29.76
   4                 44.04    48.95      39.08    46.10
-------------------------------------------------------
 Total              100.00   100.00     100.00   100.00

II. Financial Statements for Average Wisconsin Farm Supply Cooperatives, 1966

Both nominal and real values are represented in the financial figures for the cooperatives appearing in Tables 3 and 4. The distinction between nominal and real values is made to account for the possibility that a cooperative could exhibit apparent (nominal) growth as reflected by changes in its financial statements; however, when the effects of inflation are accounted for, its actual (real) condition may have changed little, not at all, or worsened between the periods compared. In the study, nominal figures were deflated by the Consumer Price Index (CPI)2 and converted to real figures. The real values should provide a less distorted picture of growth in the cooperatives. Tables 5, 6 and 7 elaborate on changes in the nominal and real financial condition of the cooperatives.

Real vs. Nominal Changes in Balance Sheet Items.
The figures in Table 3 show the contribution of inflation to changes in the balance sheet. For example, nominal current assets of the average cooperative increased from $206,054 in 1966 to $843,527 in 1977 (309%). Real current assets, on the other hand, increased only from $211,990 in 1966 to $464,699 in 1977 (119%). Nominal current liabilities of the average fa rm supply cooperative increased from $93,641 in 1966 to $494,667 in 1977 (428%); the average cooperative's real current liabilities increased from $96,338 in 1966 to $272,512 in 1977 (183%). Note that real current liabilities increased by more than real current assets. This phenomenon appears to be related to increased use of short-term debt by the cooperatives and a corresponding reduction in working capital (current assets minus current liabilities).

Changes in Assets.
Current assets for the average Wisconsin farm supply cooperative increased from 43% of total assets in 1966 to 53% of total assets in 1977 (Table 3). This increase presumably reflects increases in cash required to conduct business and increases in accounts receivable. Additional. cash generally is required to deal with higher real sales and inflation, while higher levels for accounts receivable also may reflect the effects of increased sales and problems with collections.

Fixed assets for the average cooperative declined from 29% of total assets in 1966 to 23% of total assets in 1977 (Table 3). In 1977, fixed assets as a percentage of total assets were largest (25%) for the Group 4 cooperatives and smallest (20%) for the Group 1 cooperatives. However, fixed assets as a per- centage of all assets declined substantially from 1966-1977 -- even for the Group 4 cooperatives (from 32% to 25%). The reduction in investment in fixed facilities is not unique to Wisconsin farm supply cooperatives. According to Brown, this phenomenon is occurring in much of U.S. industry.3 Nonetheless, it suggests that Wisconsin farm supply cooperatives may need to embark on new programs of investment in plant and equipment to remain competitive and develop the capacity to further increase sales. 


Table 3: Nominal and Real Balance Sheets for the Average Wisconsin Fanm Supply Cooperative, 1966 and 1977.

Balance Sheet Item  Balance Sheet for 1966  % of Assets or Liability & Equity  Balance Sheet for 1977  % of Assets or Liability & Equity 
Nominal Balance Sheet
Current Assets 
Fixed Assets 
Investments 
Other Assets 
Total Assets 
Current Liabitities 
Long-term Liabilities 
Equity (net worth) 
Total Liabilities and Equity 
$206,054 
136,067 
123,204 
11,027 
476,352 
93,641 
43,434 
339,277 
476,352 
43.3 
28.6 
25.9 
2.3 
100.1 
19.7 
9.1 
71.2 
100.0 
$843,527 
369,606 
373,057 
4,341 
1,590,531 
494,667 
151,091 
944,773 
1,590,531 
53.0 
23.2 
23.5 
0.3 
100.0 
31.1 
9.5 
59.4 
100.0 
Real Balance Sheet (1967=100) 
Current Assets 
Fixed Assets 
Investments 
Other Assets 
Total Assets 
Current Liabitities 
Long-term Liabilities 
Equity (net worth) 
Total Liabilities and Equity 
211,990 
139,987 
126,753 
11,344 
490,074 
96,338 
44,686 
349,050 
490,074 
43.3 
28.6 
25.9 
2.3 
100.1 
19.7 
9.1 
71.2 
100.0 
464,699 
203,616 
205,517 
2,391 
876,223 
272,512 
83,236 
520,475 
876,223 
53.0 
23.2 
23.5 
0.3 
100.0 
31.1 
9.5 
59.4 
100.0 

Changes in Liabilities and Equitles.
Current liabilities for the average cooperative increased from 20% of total liabilities and equity in 1966 to 31% of liabilities and equity in 1977 (Table 3). The contribution of member equity for the average cooperative declined from 7t. of total liabilities and equity in 1966 to 59% of total liabilities and equity in 1977. Since the share of liabilities and equity accounted for by long-tenm debt remained almost constant during 1966-1977, the average cooperative apparently replaced a substantial amount of equity capital (long a dominant source of capital) with short-term debt.

The larger Group 4 cooperatives have proceeded farthest with the substitution of other sources of capital for member equity. For example, member equity capital comprised 67% of total liabilities and equity for the average Group 4 cooperative in 1966. Equity as a percentage of total liabilities and equity for the average Group 4 cooperative declined to 54% in 1977. This was 6 percentage points lower than the contribution of member equity to total liabilities and equity for the average Wisconsin farm supply cooperative in 1977.

Dahl and Dobson suggested that Wisconsin fanm supply cooperatives might reduce the financial sacrifices (opportunity costs) of farmer-members if they made less use of equity capital. 4 However, the Dahl-Dobson prescription called for Wisconsin fanm supply cooperatives to replace member equity with long-term debt which is generally less costly than short-term debt. Why the average farm supply cooperative increased use of short-term debt is uncertain. Since this choice could increase capital costs for the cooperatives, it may warrant the attention of management.


Table 4: Nominal and Real Operating Statements for the Average Wisconsin Farm Supply Cooperative, 1966 and 1977
                             1967 = 100
  
                          Operating          Operating
Operating Statement       Statement  % of    Statement    % of
  Item                    for 1966  Net Sales for 1977  Net Sales
  
Nominal Operating Statement
  
Net Sales                 $789,952   100.0   $2,938,665   100.0
Cost of Goods Sold         637,164    80.7    2,435,485    82.9
 
GROSS MARGIN               152,788    19.3      503,180    17.1
 
Patronage Refunds Received  14,504     1.8       74,400     2.5
Other Income or (Expense)     (852)     -*        7,432     0.3

GROSS OPERATING MARGIN     166,440    21.1      585,012    19.9
  
Operating Expense          134,381    17.0      454,851    15.5
 
NET SAVINGS                 32,059     4.1      130,161     4.4
  
Real Operating Statement

Net Sales                 $812,708   100.0   $1,618,911   100.0
Cost of Goods Sold         655,519    80.7    1,341,709    82.9
 
GROSS MARGIN               157,189    19.3      277,202    17.1
 
Patronage Refunds Received  14,922     1.8       40,987     2.5
Other Income or (Expense)     (876)     -*        4,094     0.3
  
GROSS OPERATING MARGIN     171,235    21.1      322,283    19.9

Operating Expense          138,252    17.0      250,577    15.5

NET SAVINGS                 32,983     4.1       71,706     4.4

---------------------------------------------------------------  
-*  Less than .1

Changes in the Operating Statements.
The operating statements for 1966 and 1977 fail to reveal the major changes that were evident in the balance sheets for these two years. Thus, many items in the operating statement for the average cooperative in 1977 differed by only one or two percentage points from the comparable figures for 1966 (Table 4). Moreover, offsetting changes involving cost of goods sold, patronage refunds, and operating expenses (expressed as a percentage of net sales) kept net savings for the average cooperative in 1977 near the 1966 level. Of course, nominal values of the variables in- creased substantially from 1966 to 1977. Nominal operating expenses, for example, increased from $134,381 in 1966 to $454,851 in 1977 (238%). However, the real increase in operating expenses was a smaller 81% during this period. The comparison underscores the importance of examining both real and nominal values to gain a more complete picture of financial changes.

Nominal and Real Growth Figures Extracted from Financial Statements.
Nominal and real financial growth figures extracted from the balance sheets and operating statements for average cooperatives appear in Tables 5 and 6. In general, the smaller cooperatives (especially those in Group 1) exhibited slower growth in nominal assets, net worth, total sales, and net savings than the average Wisconsin farm supply cooperative (Table 5). The average growth in nominal fixed assets, total assets, net worth, sales, and net savings during 1966-1977 for the average Group 1 cooperative was 100 percentage points lower than the all- cooperative average; the comparable figure for the average Group 2 cooperative was 43 percentage points lower than the all cooperative average. The largest cooperatives recorded the highest rates of nominal growth, with the Group 4 cooperative exhibiting the highest average growth for every variable except net savings (Table 5). The Group 3 cooperative obtained the highest rate of growth in net savings (320%) during 1966-1977. 


Table 5: Nominal Financial Growth Characteristics for Average Wisconsin Farm Supply Cooperatives, 1966 and 1977
Cooperative      Fixed    Total      Net     Total      Net
Group and Year   Assets   Assets    Worth    Sales    Savings
  
Group 1
  
l966          $ 46,211 $ 182,925 $ 129,511 $ 325,150  $ 3,034
1977            83,865   420,602   276,043   803,427   26,185
Percent 
Change 
1966-77           +82%     +130%     +113%     +147%    +190%
  
Group 2
  
1966          $lO5,9l9 $ 387,344 $ 295,128 $ 578,588 $ 25,322
1977           249,351 1,115,788   697,320 1,954,220   87,l50
Percent 
Change 
1966-77          +135%     +188%     +145%     +238%    +244%
  
Group 3

1966          $170,625 $ 647,830 $ 482,103 $ 964,451 $ 42,356
1977           402,570 1,894,279 1,223,534 3,267,706  178,061
Percent 
Change 
1966-77          +136%     +192%     +154%     +239%    +320%
  
Group 4
 
1966          $251,548 $ 781,470 $ 523,751 $1,469,950 $ 58,809
1977           744,855 2,933,993 1,574,674  5,778,187  229,782
Percent 
Change 
1966-77          +196%     +275%     +201%      +293%    +261%
  
Weighted Average for
  all Cooperatives
  
1966          $136,067 $ 476,352 $ 339,277  $ 789,952 $ 32,059
1977           369,606 1,590,531   944,773  2,938,665  130,061
Percent 
Change 
1966-77          +172%     +234%     +178%      +272%    +306%

The average cooperative in the four size groups recorded real increases in net worth, sales, net savings and assets during 1966-1977, which were substantially lower than the nominal growth rates (Table 6). For example, the nominal sales of the average cooperative increased 272%. from 1966-1977, while the real growth in sales for the average cooperative was 99%. during this period. The larger Group 3 and Group 4 cooperatives also exhibited the highest rates of real growth. The Group 4 cooperatives obtained the highest rates of real growth for all variables except real savings. The Group 3 ccoperative had the highest rate of growth in real net savings (125%) during 1966-1977. The only negative srowth figure recorded was real fixed assets for the Group 1 cooperative, which declined 3% during the 1966-1977 period. 
Table 6: Percentage Change in Nominal and Real Net Worth, Total Sales, Net Savings, Total Assets, and Fixed Assets from 1966-77 for Average Wisconsin Farm Supply Cooperatives
        Percent Change from 1966 through 1977 in:

Cooperative  Fixed       Total         Net        Total         Net
   Group    Assets       Assets       Worth       Sales       Savings
         Nominal/Real Nominal/Real Nomina/Real Nominal/Real Nominal/Real
  
Group 1    +82  - 3    +130  +23   +113 +14     +147  +32    +190  +55
Group 2   +135  +26    +188  +54   +145 +31     +238  +81    +244  +84
Group 3   +136  +26    +192  +57   +154 +36     +239  +81    +320 +125
Group 4   +196  +59    +275 +101   +201 +61     +293 +110    +291 +109
  
Weighted Average for All Cooperatives 
          +172  +46    +234  +79   +178 +49     +272  +99    +306 +177

III. Current Assets. Liquidity Ratios and Accounts Receivable for Wisconsin Fanm Supply Cooperatives, Selected Years 1966-1977.

Current assets are generally defined as those assets of the fi rm which are expected to be converted into cash within one year. Included in this asset category are cash, marketable securities, accounts receivable, and inventories. Liquidity refers to the ability of the firm to meet its maturing short- tenm obligations. This section addresses this aspect of financial management, with emphasis on accounts receivable and credit policies.

Current Ratios.
The current ratios given in Table 7 are defined as the ratio of current assets to current liabilities. It is a generally accepted measure of liquidity since it indicates the extent to which the claims of short-term creditors are covered by assets that are expected to be converted into cash in a period roughly corresponding to the maturity of the claims. A current ratio of 1.8, for example, means that for each dollar of current liabilities, current assets of S1.80 will be available to satisfy short-term obligations.

Smith and Cooper5 and Gries and Torgerson6 writing in the late 1960s and early 1970s, respectively, suggested that cooperatives should maintain a 2:1 ratio. A higher ratio would suggest that earning opportunities are being foregone by the firm, while a lower ratio would indicate potential problems in meeting current obligations. The 2:1 figure recommended, therefore, re- presents a trade-off between earnings foregone, on one hand, and unacceptable risk on the other.

The average cooperative in each size category generally maintained a current ratio above 2:1 until 1969 or 1970 (Table 7). Then, except for those of the smaller Group 1 cooperatives, the current ratios declined to the 1.60 to 1.80 range. The reduction in the current ratios paralleled a decline in this ratio for the Robert Morris Associates firms (Table 7). The general decline in liquidity recorded by the Wisconsin cooperatives and the Robert Morris firms may reflect a desire on the part of managers to avoid sacrifices in earnings and growth associated with excessive liquidity.

The average current ratio maintained by cooperatives in the different size groups varied Inversely with the size of cooperatives (Table 7). For example, the average cooperative in Group l recorded a 2.05 current ratio in 1977, while the larger Group 4 cooperative recorded a l.59 current ratio for the same year. The current ratios recorded by the Group I and Group 4 cooperatives raise questions: Are the Group 1 cooperatives sacrificing earning opportunities by maintaining excessive liquidity? Are problems with inadequate liquidity likely to arise for Group 4 cooperatives, especially for those with below average liquidity?


Table 7: Current Ratios for the Average Cooperative in Sales Groups 1, 2, 3 and 4, All Cooperative Group and Firms in the Robert Morris Industry Group
                   Average Current Ratio for
       Group 1 Group 2 Group 3 Group 4  All Cooperative Robert Morris
Year    Co-op   Co-op   Co-op   Co-op        Group      Industry Group
    
1966    2.55    2.20    2.12    2.18         2.20         2.00
1967    2.49    2.23    1.87    1.92         2.02         2.00
1968    2.56    1.96    2.04    2.08         2.08         2.00
1969    2.28    2.21    2.06    1.78         1.99         2.10
1970    2.22    1.94    1.81    1.74         1.86         2.00
1971    2.27    1.94    1.92    1.84         1.92         1.80
1972    2.28    1.80    1.85    1.81         1.85         1.70
1973    2.65    1.87    1.93    1.71         1.85         1.60
1974    2.29    1.98    1.96    1.80         1.91         1.60
1975    2.23    1.99    1.92    1.76         1.88         1.70
1976    2.12    2.01    1.88    1.69         1.83         1.60
1977    2.05    1.82    1.71    1.59         1.71         1.70
    
Simple Average for 1966-77
        2.33    2.00    1.93    1.83         1.93         1.82

Accounts Receivable.
The financing of sales to farmer members represents an important source of short-term financing for farmers. Those who manage these trade accounts receivable, however, must establish a proper balance between the benefits and costs of extending credit.

A measure commonly used to identify a firm's credit policy is given in Table 8 by the ratio of accounts receivable to current assets. This ratio evaluates the proportion of current assets tied up in receivables. A relatively high ratio identifies a credit policy which may need to be more strict, whereas a low ratio may suggest that a firm is sacrificing profitable sales by maintaining a credit policy which is too strict. Gries and Torgerson recommend as a guideline that this ratio should never exceed 40 percent.7 


Table 8: Trade Accounts Receivable as a Percent of Current Assets of the Average Cooperative in Sales Groups 1, 2, 3 and 4 and the All Cooperative Group, 1973-1977
    
                       Accounts Receivable as Percent of Current Assets

Cooperative Group        1973     1974     1975     1976     1977
                                        (percent)
    
Group 1                 49.79    47.31    47.03    48.28    49.19
Group 2                 41.26    36.76    34.07    39.17    38.13
Group 3                 39.13    37.41    35.61    37.79    38.71
Group 4                 35.98    37.20    36.80    41.20    40.22

All Cooperative Group   40.02    38.85    37.51    41.55    41.09

Based on the guidelines suggested by Gries and Torgerson, it appears that the smaller cooperatives in Group 1 had an excessive amount of current assets tied up in trade accounts receivable during 1973-1977. Therefore, accounts receivable may need to be monitored more closely in the smaller supply cooperatives. This monitoring may be especially necessary since, as indicated later, the smaller firms have exhibited the highest delinquency rates as well as the highest bad debt loss experience.

The figures in Table 9 illustrate whether the rate of growth in accounts receivable was equal to, in excess of, or less than the rate of growth in sales for the average cooperatives. In the study, sales equaled actual sales less discounts and returned purchases. While this is useful for comparing how accounts receivable and sales expand, it should be recognized that a strict cause and effect relationship is not implied. This is because sales can increase in response to liberalizing credit terms or to other factors. Similarly, the growth in accounts receivable may reflect a change in policy or may be a result of expanded sales.

For 1974, accounts receivable did not grow as rapidly as sales for the farm supply cooperatives. For 1975-1977, however, results are mixed. During 1975, the increase in accounts receivable occurred at a faster rate than sales with the exception of smaller Group 2 cooperatives. The rate of increase in receivables continued to exceed the rate of increase in sales for all cooperative groups in 1976. By 1977, the smaller cooperatives in Groups 1 and 2 reduced the growth rate for accounts receivable below that of sales, while the larger firms in Groups 3 and 4 continued a rate of increase in accounts receivable in excess of sales growth. It appears that a buildup in accounts receivable was developing for the larger cooperatives during 1975-1977. In order to determine the seriousness of this condition, the rate of delinquency and bad debt losses for the cooperatives were examined. 


Table 9: Growth in Trade Accounts Receivable and Sales of the Average Cooperative in Sales Groups 1, 2, 3 and 4, and the All Cooperative Group, 1974-1977
Cooperative          Percent Change from Year Earlier 
  Group            in Accounts Receivable and Net Sales 
  
                          1974   1975   1976   1977  
Group 1
  Accounts Receivable    31.30   7.75   9.82  10.51
  Sales                  37.52   2.84   9.02  11.06
 
Group 2
  Accounts Receivable    19.25   2.72  19.47  14.24
  Sales                  34.16   4.56  11.32  16.18
  
Group 3
  Accounts Receivable    21.91   8.30  15.06  18.34
  Sales                  40.21   7.00  15.00  13.17
  
Group 4
  Accounts Receivable    35.97  11.44  20.70  14.47
  Sales                  44.19  10.18  18.14   9.02

All Cooperative Group
  Accounts Receivable    27.78   8.40  18.26  14.86
  Sales                  40.42   7.70  15.37  11.67

Delinquency Index.
A delinquency index for trade accounts receivable is presented in Table 10. This index equals the ratio of noncurrent trade accounts receivable to total accounts receivable. The assumption made is that current accounts receivable consist of those accounts which are 30 days or less in age, while noncurrent accounts receivable are those over 30 days of age. A relatively high ratio indicates that the firm has a higher proportion of its accounts which are older than 30 days. This obviously becomes a management concern if credit terms are for a 30-day period.8 
Table 10: Noncurrent Trade Accounts Receivable to Total Accounts Receivable Ratios for the Average Cooperative in Groups 1, 2, 3 and 4 and the All Cooperative Group, 1973-1977
                       Ratio of Noncurrent Accounts Receivable to Total
                                  Accounts Receivable (percent)
  
Cooperative Group          1973     1974     1975     1976     1977
  
Group 1                   64.81    65.38    63.53    64.26    64.27
Group 2                   61.62    60.40    60.52    60.72    61.07
Group 3                   56.72    55.75    59.80    53.11    61.76
Group 4                   51.11    54.01    53.78    54.90    57.94
All Cooperative Group     56.09    56.68    57.43    56.30    59.96

An inverse relationship existed between the delinquency rate and the sales volume of the firms (Table 10). Thus, cooperatives in Groups 1 and 2 recorded the highest delinquency rates during 1973-77, while those in Groups 3 and 4 re- corded lower rates. Note, however, that the delinquency rates for the smaller fi rms remained relatively constant during 1973-1977, while the delinquency rates increased for the larger firms during this period. The delinquency rate for the Group 3 cooperatives, for example, increased 5.04% over the period, while those in Group 4 experienced an increase of 6.83% during 1973-1977. These results suggest that larger firms may have become more lax in management of accounts receivable in recent years. Such developments may need to be carefully monitored.

Bad Debt Losses.
Information on the bad debt losses of the average cooperative in the different size categories during 1973-1977 appears in Table 11. For purposes of the analysis, bad debt losses were defined as accounts receivable which were written off as uncollectible by the cooperatives. The larger cooperatives experienced the largest absolute bad debt losses; for example, the average cooperative In Group 4 sustained a bad debt loss of $13,955 in 1977, compared to a $2,844 bad debt loss for the average Group 1 cooperative during 1977. However, bad debt losses as a percentage of sales were greater for the smaller cooperatives than for the larger ones (Table 11). 


Table 11. Bad Debt Expense for the Average Cooperative in Sales Groups 1, 2, 3 and 4 and the All Cooperative Group, 1973-1977

 

   
Cooperative Group
 and Measure                     Bad Debt Expense for
 of Bad Debt          1973     1974     1975     1976     1977
  
Group 1 
  Dollars           $1,533   $2.027   $3,460   $3,022   $2,844
  Percent of Sales     .31      .30      .50      .40      .32
 
Group 2
  Dollars            7,625    7,824    4,696    5,136    5,487
  Percent of Sales     .71      .55      .32      .31      .28
  
Group 3
  Dollars            5,678    6,102    6,119    5,659    7,131
  Percent of Sales     .35      .27      .25      .20      .22

Group 4
  Dollars            8,052   14,861   11,963   11,669   13,955
  Percent of Sales     .29      .47      .27      .23      .25
  
All Cooperative Group
  Dollars            6,208    8,185    6,638    6,541    7,584
  Percent of Sales     .41      .38      .29      .25      .25

IV. Solvency Ratios

Whereas liquidity measures the ability of the firm to meet short-term liabilities, solvency focuses on long-term obligations. As used here, solvency refers to the relationship between a firm's debt and equity capital. The higher the ratio of debt to equity, the less protection that is available to a firm's creditors. In Table 12, solvency is measured by the ratio of equity (net worth) to total (short and long-term) debt.

Gries and Torgerson suggest that a .8 to 1.0 debt to equity ratio may be an appropriate target for farm supply cooperatives.9 When this ratio exceeds 1.0 the firm's equity capital may be reaching levels which are too small to protect creditors from losses. On the other hand, a relatively low value spells little risk to creditors, but it also means that the cooperatives may forego some income-earning opportunities associated with use of financial leverage.

As indicated in Table 12, the average cooperative in the four groups maintained debt-equity ratios during 1966-1977 which were substantially smaller than the target ratio suggested by Gries and Torgerson and the Robert Morris Industry Standard ratios. Moreover, while the debt-equity ratio for the cooperatives (especially the Group 4 cooperatives) did rise modestly beginning in about 1970, the increase was substantially less than for the Robert Morris fines. The Group 4 cooperatives recorded the largest increase in the debt-equity ratios during 1966-1977, increasing them from .49 in 1966 to .86 ln 1977 (Table 12). The equity capital used by the Group 4 cooperatives declined from 67% of total liabilities and equity in 1966 to 54% of total liabilities and equity in 1977, as these cooperatives substituted short-term debt for member-supplied equity capital.


Table 12: Debt to Equity Ratios for the Average Cooperative in Sales Groups 1, 2, 3 and 4, the All-Cooperative Group and firms in the Robert Morris Industry Group

 

                           Average Debt-Equity Ratio
  
           Group 1  Group 2  Group 3  Group 4  All Co-op  Robert Morris
Year        Co-op    Co-op    Co-op    Co-op    Group    Industry Group
  
1966          .41      .36      .34      .49      .40          .86
1967          .45      .37      .42      .57      .46          .80
1968          .45      .44      .43      .55      .48          .80
1969          .47      .42      .42      .62      .49          .80
1970          .52      .47      .48      .72      .56          .90
1971          .51      .48      .51      .73      .58         1.00
1972          .51      .53      .53      .74      .60         1.20
1973          .42      .50      .49      .60      .64         1.40
1974          .47      .52      .48      .79      .61         1.50
1975          .45      .52      .50      .75      .60         1.40
1976          .51      .53      .49      .75      .60         1.40
1977          .52      .60      .55      .86      .68         1.50
Simple Average 
for 1966-77   .47      .48      .47      .70      .56         1.13

The average debt-equity ratio for all Wisconsin farm supply cooperatives was only half as large as the Robert Morris ratios for 1966-1977. This result suggests that the Wisconsin cooperatives may have used less than optimal amounts of debt. Managers of the cooperatives, therefore, may have foregone income opportunities which would have been available if more leverage had been employed.

V. Efficiency Ratios

Efficiency ratios measure how effectively a firm employed its resources. Two ratios are treated here: the sales to working capital ratio and net savings to sales ratio. Recall that sales represents actual sales less discounts and returned purchases. Working capital is the amount by which current assets exceed current liabilities. Net savings are defined as gross operating income less operating expenses.

Working Capital Turnover.
The sales to working capital ratios (working capital turnover ratios) in Table 13 were developed from information extracted from the balance sheets and operating statements of the cooperatives. These ratios show how actively working capital was turned over or put to use by the firms in generating sales. They also reflect whether the cooperatives were "over-trading", that is, attempting to make excessive use of available working capital. Such a condition is most often associated with the excessive use of short-term assets. An unusually high ratio might also indicate a situation where a firm lacks adequate operating funds to take advantage of available discounts and finds it difficult to meet maturing obligations. This typically becomes a major concern only if the ratio becomes unusually large. Schermerhorn and Page report that most agricultural business firms maintain a ratio of net sales to working capital ranging from 4.0 to 8.0.10

Except for those of cooperatives in Group 4, the sales-working capital ratios for all Wisconsin cooperatives were less than those for the Robert Morris Industry group and within the range mentioned by Schermerhorn and Page during 1966- 1977. The average working capital turnover ratio for the Group 4 cooperatives exceeded the comparable ratio for the Robert Morris group by .75 percentage points during 1966-1977. However, this does not necessarily identify any significant "over-trading" by the Group 4 firms, since the ratio for these cooperatives exceeded the comparable ratio for the Robert Morris firms by only 9% (9.08 versus 8.33).

Table 13: Net Sales to Working Capital Ratio for the Average Cooperative in Sales Groups 1, 2, 3 and 4, the All Cooperative Group, and Firms in the Robert Morris Industry Group
Average Sales-Working Capital Ratio
Year Group 1 Cooperative Group 2 Cooperative Group 3 Cooperative Group 4 Cooperative All Cooperative Group Robert Morris Industry Group
1966 6.09 6.60 6.77 7.82 7.03 7.35
1967 5.99 6.58 7.50 8.49 7.43 7.20
1968 5.75 7.28 6.72 9.17 7.62 7.00
1969 6.26 6.57 6.49 10.13 7.71 7.70
1970 6.23 7.40 6.64 9.77 7.91 7.20
1971 6.01 7.26 6.67 9.08 7.65 7.40
1972 5.69 7.67 7.08 8.87 7.77 8.70
1973 5.24 6.98 6.27 8.24 7.12 8.20
1974 5.99 6.88 6.82 9.47 7.85 8.60
1975 5.78 6.37 6.48 8.34 7.15 8.80
1976 6.14 6.70 7.18 9.66 7.97 11.30
1977 6.60 7.48 7.66 9.89 8.42 10.50
Simple Average for 1966-77 5.98 6.98 6.86 9.08 7.64 8.33
With the exception of the Group 4 firms, the cooperatives may have maintained lower than optimal working capital turnover rates during 1966- 1977. For example, the average sales-working capital ratio recorded by the Group 1 cooperatives was 5.98, or 2.35 percentage points below the comparable Robert Morris figures and 1.66 percentage points below the all Cooperative group average for this period (Table 13). Moreover, the sales- working capital ratio for the Group 1 cooperatives failed to increase during 1976-1977 (when higher interest rates presumably placed a premium on higher working capital turnover rates) by as much as that recorded by the larger firms in Groups 2, 3 and 4. Thus, managers of the Group 1 cooperatives, and possibly those managing firms in Groups 2 and 3 as well, might increase net savings if ways were found to obtain a more rapid rate of working capital turnover.

Savings to Sales Ratios.

The savings to sales ratios in Table 14 give one indication of how well cooperatives are being managed. This summary ratio shows, among other things, how managers control expenses in relation to sales revenue. The higher the ratio, the more that is being earned by the Cooperative on each dollar of sales to farmer members. Incorporated in this ratio, then, is the efficiency of the operation as well as its pricing policy.

Cooperatives in Group 3 generated the largest savings to sales ratios during 1966-1977 (Table 14). The savings to sales ratios for the Group 3 cooperatives also showed a relatively strong uptrend during 1966-1977.

The efficiency ratios for the average Wisconsin Cooperative in all size groups except Group 1 were higher than those for the Robert Morris firms. This suggests that in terms of the savings to sales ratio maintained, the cooperatives generally performed well relative to other farm supply firms.


Table 14: Savings to Sales Ratios for the Average Cooperative in Sales Groups l, 2, 3 and 4, the All Cooperative Group, and Firms in the Robert Morris Industry Group
  
  Average Savings to Sales Ratio
     Grp. 1  Grp. 2  Grp. 3  Grp. 4  All Co-op   Robert Morris  
Year  Co-op   Co-op   Co-op   Co-op    Group    Industry Group
  
1966   2.78    4.38    4.39    4.00     4.06          2.20
  
1967   3.63    4.75    4.63    4.41     4.47          1.60
1968   3.34    4.28    4.70    4.02     4.19          3.60
1969   2.79    4.25    4.73    3.79     4.04          4.20
1970   3.01    4.15    4.92    3.35     3.88          5.90
1971   3.31    4.12    4,45    3.94     4.05          4.40
1972   3.41    3.87    4.46    4.00     4.04          5.40
1973   5.11    5.02    5.84    5.41     5.42          4.10
1974   6.55    8.04    8.95    6.79     7.56          5.10
1975   s.ao    6.33    7.10    6.30     6.43          4.30
1976   3.84    4.89    6.22    4.95     5.18          3.00
1977   3.26    4.46    5.45    3.58     4.43          3.10
Simple 
Average 
for 1966-77
       3.84    4.88     5.49   4.58     4.81          3.91

VI. Profitability Ratios

The profitability of a firm is a result of a large number of policies and decisions. Although the parameters of financial performance examined thus far are factors which influence profitability, Tables 15 and 16 give more specific answers about how effectively the cooperatives were managed.

Table 15: Total Return on Total Assets and Local Return on Local Assets for the Average Cooperative in Sales Group 1, 2, 3 and 4, the Robert Morris Industry Groups and the All Cooperative Group, Selected Years 1966 through 1977 a (All numbers are percentages)

 
YEAR AND RETURN  GROUP 1 COOPERATIVE  INDUSTRY STANDARD  GROUP 2 COOPERATIVE  INDUSTRY STANDARD  GROUP 3 COOPERATIVE  INDUSTRY STANDARD  GROUP 4 COOPERATIVE  INDUSTRY STANDARD  ALL COOP. GROUP  INDUSTRY STANDARD 
1966  
Total Return on Total Assets 
4.94 5.30 6.54 4.00 6.54 6.90 7.53 6.90 6.73 6.10
1966  
Local Return on Local Assets 
2.50 N.A. 4.80 N.A. 4.70 N.A. 5.94 N.A. 4.96 N.A.
1970  
Tota1 Return on Total Assets 
5.11 3.70 6.42 6.10 6.90 5.80 6.62 5.80 6.52 5.70
1970  
Local Return on Local Assets 
3.57 N.A. 5.07 N.A. 5.64 N.A. 5.26 N.A. 5.18 N.A.
1974  
Total Return on Total Assets 
12.73 9.70 14.56 9.90 15.57 9.90 16.33 9.90 15.47 9.70
1974  
Local Return on Local Assets 
11.23 N.A. 12.82 N.A. 14.53 N.A. 14.08 N.A. 13.74 N.A.
1977  
Tota1 Return on Total Assets 
6.23 5.80 7.81 6.60 9.40 6.60 7.83 6.60 8.18 6.50
1977  
Local Return on Local Assets 
2.22 N.A. 4.15 N.A. 6.33 N.A. 4.02 N.A. 4.58 N.A.
a. The Industry Standard figures appearing in Table 15 are figures for Robert Morris Associates firms which are roughly comparable to the cooperatives in the different size categories. For example, the Industry Standard figures appearing to the right of those for the Group 1 cooperatives are for firms roughly comparable in size to the Group 1 cooperatives. 


Table 16: Ratio of Patronage Refunds Received From Other Cooperatives to Net Savings for the Average Cooperative in Sales Groups 1, 2, 3 and 4 and the All Cooperative Group, Selected Years 1966 through 1977
  
    Patronage Refunds Received from Other Cooperatives 
                 to Net Savings Ratio
    
Year    Group 1   Group 2   Group 3    Group 4  All Co-op
        Co-ops    Co-ops    Co-ops     Co-ops    Groups

1966    62.2      47.0      49.1       38.3      45.2
1970    47.9      41.3      40.3       36.1      39.4
1974    31.6      33.2      29.9       29.1      30.4
1977    72.7      60.4      50.4       59.2      57.2

In order to properly evaluate the return on assets, a distinction is made between rates of return on total assets and rates of return on local assets. Local assets are defined as total assets less total investments. Total investments include investments by local supply firms in other cooperatives--especially the affiliated regional cooperative. Two measures are developed in Table 15. The first involves total return on total assets. computed as the ratio of net savings to total assets. The second is defined as the ratio of-net local savings to local assets, where net local savings equals net savings minus patronage refunds received from other cooperatives.

In essence, the local return on local assets ratio measures the ability of the cooperative to generate savings strictly on the basis of its local operation. This accounts for assets specific to the individual cooperative as well as for local economic and geographic conditions. The difference between the two ratios is significant insofar as it reflects the extent of dependence of the local cooperative on an affiliated regional cooperative.

Returns on total assets for the Wisconsin farm supply cooperatives were significantly greater than returns on local assets during 1966-1977. As shown in Table 15 for the average firm in the all cooperative group, the 6.731 total return on total assets figure for 1966 exceeded the local return on local assets figures of 4.96% by 1.77%. The comparable differential for 1977 was 3.60% (8.18% less 4.58%). The widest differential for all four representative cooperative groups was recorded by the Group 1 firms in 1977. For these firms, total returns on total assets and local returns on local assets were 6.23% and 2.22%, respectively, for a differential of 4.01% in 1977 (Table 15).

The figures in Table 15 show the strong influence investments in other cooperatives have on the performance of the local farm supply operations. Generally, outside investments were responsible for improving returns on total assets by 2-4%. Moreover, the results show that the larger cooperatives in Groups 3 and 4 generate larger returns. Both total returns on total assets and local returns on local assets for these larger firms were substantially larger than the all cooperative average in most cases. The relatively smaller cooperatives in-Groups 1 and 2, on the other hand, recorded total returns on total assets and local returns on local assets substantially below the all cooperative average for the years examined.

The importance of patronage refunds received from other cooperatives (generally the affiliated regional cooperative) on local operations declined between 1966-1974 and increased again in 1977 (Table 16). Note the relatively greater dependence placed on patronage refunds from other cooperatives by the smaller cooperatives. Specifically, refunds as a percent of savings for cooperatives in Groups 1 and 2 ranged from 32~. to 73! during the 1966-1977 period. The smaller range of 291 to 59. was recorded by the larger cooperatives in Groups 3 and 4 during the same period. In all but one case, the Group 4 firms placed the least dependence on patronage returns from other cooperatives, recording return ratios significantly below those of the smaller firms as well as the all cooperative average. A heavy dependence on other cooperatives as a source of savings may create a situation where local management becomes limited in its decision-making ability. 



Appendix Table 1. Accounts Receivable Aging Schedules for the Average Cooperative in Sales Groups 1, 2, 3 and 4 and the All Cooperative Group, 1973-1977

Cooperative Group                     Average Amount of Accounts                     
And Age of Accounts             Receivable in Age Category as of Fiscal
    Category                                Year Ending
    
                          1973      1974     1975     1976     1977
Group 1 Cooperatives a
  1-30 days            $23,980   $30,978  $35,154  $37,838  $41,805
  1 mo - 6 mo           27,953    39,033   38,673   43,985   49,091
  6 mo - 1 yr            7,205    11,547   11,930   12,541   15,251
  Over 1 year            8,817     7,242   10,857   11,703   11,278
  Other                    186       670     (213)    (199)    (435)
  Total                 68,141    89,470   96,401  105,868  116,990

Group 2 Cooperatives b
  1-30 days            $50,740   $61,162  $62,643  $76,013  $86,063
  1 mo - 6 mo           51,370    67,690   64,893   82,012   95,844
  6 mo - 1 yr           16,026    15,423   18,557   21,427   24,829
  Over 1 year           14,034    10,997   13,300   14,458   15,217
  Other                     38      (828)    (740)    (416)    (896)
  Total                132,208   154,444  158,653  193,494  221,057
    
Group 3 Cooperatives c
  1-30 days            $91,675  $114,278 $112,442 $150,905 $145,623
  1 mo - 6 mo           82,796   109,215  127,574  122,971  180,198
  6 mo - 1 yr           18,456    19,489   22,126   23,594   25,635
  Over 1 year           17,808    14,214   15,938   21,150   25,865
  Other                  1,105     1,055    1,600    3,192    3,495
  Total                211,840   258,251  279,680  321,812  380,816
    
Group 4 Cooperatives d
  1-30 days           $148,468  $189,906 $212,715 $250,518 $267,441
  1 mo - 6 mo          123,034   186,074  197,008  236,540  281,069
  6 mo - 1 yr           20,452    28,326   37,394   47,491   61,505
  Over 1 year           14,973    13,574   24,551   26,825   32,841
  Other                 (3,228)   (4,925) (11,463)  (5,918)  (7,029)
  Total                303,699   412,955  460,205  553,456  635,827
    
All Cooperative Group e
  1-30 days            $80,318  $100,554 $107,110 $130,937 $138,779
  1 mo - 6 mo           72,719   102,066  108,034  124,012  154,920
  6 mo - 1 yr           16,160    18,932   22,965   26,974   32,751
  Over 1 year           14,230    11,732   16,314   18,663   21,538
  Other                   (516)   (1,164)  (2,809)    (934)  (1,355)
  Total                182,911   232,120  251,514  299,652  346,633
a. Figures for Group 1 Cooperatives are based on data for 25 firms for 1973-76 and for 24 firms for 1977.

b. Figures for Group 2 Cooperatives are based on data for 48 firms for 1973, 1976 and 1977 and for 49 firms for 1974 and 1975.

c. Figures for Group 3 Cooperatives are based on data for 33 firms for 1973-77.

d. Figures for Group 4 cooperatives are based on data for 36 firms for 1973-77.

e. Figures for All Cooperative Group are based on data for 141 firms in 1977, 142 firms in 1973 and 1976 and 143 firms in 1974 and 1975.


Footnotes

1 The Robert Morris Associates benchmark figures employed in the study represent figures collected by bank loan officers from loan application figures submitted by farm supply retailers across the U.S. and Canada. These figures were obtained from Robert Morris Associates, Annual Statement Studies, Philadelphia, Pennsylvania, for various years.

2 The CPI deflator was used since it was suggested by the Financial Accounting Standards Board in 1979 for removing general effects of inflation from financial statements.

3 Brown, Gail N., statement made at session dealing with the "Impact of Inflation on Cooperatives" at the Annual Meeting of the Wisconsin Federation of Cooperatives. November 13, 1979, Oconomowoc, Wisconsin.

4 Dahl, Wilmer A. and W.D. Dobson, Reducing Financing Costs and Financial Management Problems of Cooperatives, Res. Rep. R2791, College of Agricultural and Life Sciences, University of Wisconsin-Madison, June 1976.

5 Smith, Frank J., Jr. and Ken Cooper, The Financial Management of Agribusiness Firms, Spec. Rep. 26, Dept. of Agr. and Applied Econ., University of Minnesota, September, 1967.

6 Gries, Gary E., and Randall E. Torgerson, Financial Structure of Local Missouri Farm Supply Cooperatives, Spec. Rep. 157, Dept. of Ag. Econ., University of Missouri, Columbia, August 1973.

7 Ibid.

8 Appendix Table 1 contains a detailed aging schedule of accounts receivable for average cooperatives in Groups 1, 2, 3 and 4 and the All-Cooperative Group during 1973-1977. The aging schedules show for the average cooperative in each group the dollar amount of accounts receivable which are 1-30 days, 1 month-6 months, 6 months-1 year, and over 1 year of age.

9 op. cit.

10 Schermerhorn, Richard E. and R.E. Page, Financial Statement Analysis for Agri-Business Firms, Circular E-812, Oklahoma State University Extension Service, Oklahoma State University.


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