Topics: Cooperative, Business, Credit union Pages: 2 (677 words) Published: January 20, 2013
Capital Formation Starting a new cooperative can create a need for substantial capital. A problem develops when trying to operate with limited membership equity capital. The task of financing a new cooperative with member equity alone is usually impossible. Therefore, the best source of additional funds needed is from members in the form of: a) membership fee or purchase of stock; b) agreement to withhold portion of net earnings profits); c) by assessment based on units of products sold or purchased. Cash Trading- This is business done on a cash and carry basis. The customer enjoys at least the use of the goods and services for the cash payment he/she gives. Cash trading promotes equality since anybody with cash can enjoy the service patronage. This practice can train members to observe the habit of balanced spending. Furthermore, the cooperative would be able to avoid bad debts and stabilize business operations. Finally, it is a way of increasing growth. Selling at market price- Cooperatives offer goods and services at prevailing market prices. This promotes stability. It can cope with operational expenses and cover up the negative effects of shrinkage, depreciation and losses. It helps maintain the prices of goods; Cooperatives can avoid destructive competition- Fostering constructive competition among cooperatives will safeguard the interests of consumers. Cooperatives are encouraged to cooperate in unison and bring their joint power in the market up to the level achieved by enterprises that are operated for the benefit of other stakeholders. They cooperate in order to get a fair deal from the large scale buyers of their products. Consumers cooperate to get a better deal from manufacturers and suppliers. Credit unions are formed to counter the power of large scale financial institutions. Price fixing agreements and cartel methods are prevented. Constant expansion- As organizations, cooperatives have to grow for community services. Expansion is a must. It is...
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