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USDA =a
United States Department of Agriculture
Rural BusinessCgccyE&ive FIBS Research Report 154

Analysis of Financial Statements:
Local Farm Supply, Marketing Cooperatives

This report analyzes the balance sheets and income statements of local farm supply and marketing cooperatives, comparing 1995 and 1994 and trends over the past 10 years. The data in this report represent four cooperative sizes and types. Common size income statements and balance sheets are used to compare different cooperative sizes and types. Trends for major balance sheet and income statement items and ratio analysis are used to compare and contrast cooperatives by size and type. Key words: Cooperatives, balance sheet, income statement, farm supply, marketing, sales, and financial ratios.

Analysis of Financial Statements:
Local Farm Supply, Marketing Cooperatives

E. Eldon Eversull and Beverly L. Rotan Rural Business-Cooperative Service U.S. Department of Agriculture

FIBS Research Report 154 March 1997 Price: Domestic-S4.50; Foreign-$500

Preface

This report studied the financial statements of local cooperatives, comparing 1995, 1994, and the past 10 years. Trends of major balance sheet and income statement items as well as financial ratios are presented for four cooperative sizes and types. The information provides cooperative managers and boards of directors with a basis to compare their cooperatives’ historical performance with representative cooperative data. The authors thank the cooperatives that provided their financial statements to RBS-Cooperative Service (CS) and made this report possible. Special thanks to CS staffers David S. Chesnick and Charles A. Kraenzle for reviewing the initial draft.

Contents

Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

..~i

Profile of Respondent Cooperatives ..................................... .l

Balance Sheet Definitions ............................................. .3

Analysis of the Balance Sheet ......................................... .4

Description of the Income Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

.9

Analysis of the Income Statement ......................................l 1

Financial Ratio Analysis ............................................. .17

Summary and Conclusions ........................................... .22

Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

..2 3

Appendix..........................................................2

4

ii

Highlights

Financial statements of 1,610 local farm supply and marketing cooperatives were used for this report. The statements of 432 cooperatives were used to compare 1995 to 1994, while 1,610 cooperatives were used to look at trends over the past 10 years. Cooperatives were divided into four groups based on their mix of net sales between supplies sold and farm products marketed. They were also divided into four size categories, based on their total sales volume. Average net income increased 14 percent from 1994 to 1995. In 1995, average net sales for all cooperatives studied was $12.2 million, up 8 percent from 1994. More than 36 percent of the cooperatives studied were small cooperatives-sales of less than !§5 million. Cooperatives not only were important to their member/patrons, but also were an important asset to their rural communities. They were probably one of the community’s larger employers, employing an average 21 full-time and 9 part-time employees with an average annual payroll of $707,000. Petroleum products and fertilizer were the two principal farm supplies sold. Marketing activities (mainly grains and oilseeds) provided more than 54 percent of sales for these cooperatives. Average total assets grew 17 percent between 1994 and 1995, fueled by large increases in inventories. To...
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