Professional Documents
Culture Documents
Introduction
of individuals meaning that when the efforts of more people are pooled together
they would be able to accomplish more than the action of just one person.
opportunities for themselves, find a productive work i.e. (selling of farm inputs,
production of farm produce) that not only facilitate their wellbeing and stability but
also give them the support they need to improve their lives and remain active in
employment and income for millions of the world’s population. Over 800 million
al., 2007).
for maintaining life in human body (Srinivasan R: 2010). In the same way, finance
is absolutely necessary for the survival and smooth running of business. Finance
produce goods and market them. Without finance, the business would come to a
halt.
carry on operations and achieve the goals. It has been rightly stated that
business needs money to make more money. Finance may be defined as the
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terms, these results are reflected in the firm's return on investment, return on
assets, value added, etc. One final way of evaluating financial performance is to
simply compare financial statements from one period to another period and to
based organization originally formed by 15 settlers in August 1983 with the help
Intercultural Development (PAFID) to help the settlers fight for their rights to the
National Irrigations Administration (NIA). It started its operation since 1986 with
only one program on credit re-lending. Today it has expanded to seven services
and Salary Loan, Savings and Time Deposit, Consumer Store, Agricultural Inputs
Trading with one satellite consumer store as Barangay Dallao, Cordon, Isabela
and one satellite office at National Highway, Diadi, Nueva Vizcaya and has
expanded its service to adjacent provinces like, Ifugao, Nueva Vizcaya, and
Quirino.
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Since then it has increased its working capital and due to this has
increased its membership where financial statements are reported annually to all
its shareholders to inform them of the current financial state of the cooperative. It
is due to this that this study would like to gather the perception of both
cooperative.
1.1 Liquidity
1.2 Stability
1.3 Profitability
Theoretical Framework
and, in many cases, to challenge and extend existing knowledge within the limits
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evaluation. In the first process the possible outcomes of the decision are ordered
following some probability. Prospect theory was developed by Amos Tversky and
realistic alternative approach to the expected utility theory. The prospect theory
of economics describes how the investors can choose the right alternatives
involving risks. The theory helps people to opt for the right financial decision.
The study would be useful to the study in such manner that it will help the
their financial performance and thus find solutions or compromises for them to
The application of the term rationality varies with the subject. Many other
economic theories are concerned about the mechanism of the market that
enables the production and distribution of goods. But the Rational Choice Theory
is extensively used in applying the same principles that are used by other
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time and many more. According to the Rational Choice Theory, each and every
exchange. If the action is economic, the term ‘exchange’ is used to denote the
exchange of certain goods and various services but if the exchange is social,
interchange of behaviors and approvals takes place. Again, to keep the social
and economic action parallel to each other, the Rational Choice Theory
considers reward and punishment as benefit and cost respectively and the theory
holds that the human action is dominated by their desires of getting good
rewards.
measuring the results of the firm’s policies and operations in monetary terms.
These results are reflected in the firm's return on investment, return on assets,
value added, etc. The main purpose of this research is to study the financial
are selected based on continuous auditing of the targeted unions ’. The study
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considered three years’ auditing report with regard to quantitative data analysis
using financial analysis tools, such as liquidity ratios ,leverage, profitability ratio
Trend analysis of balance sheet and income statement, and Ratio analysis for
illustrated that the financial position of the unions has not maintained satisfactory
level of financial assessment; since the Liquidity ratio of the union is not sound
enough under the study period. The study results indicated that the borrowing
power of the unions and the profitability of the unions are lower than the average.
The Asset utilization of the unions is not satisfactory and the unions have to sale
additional share capital and unproductive fixed asset to increase own fund. To
improve their efficiency in order to gain enough profit ,and to save accumulated
profit the unions must decrease administrative and operating expense which
primary and secondary Unions are organized in the rural agricultural areas. They
major function is to supply farm inputs; fertilizers, quality seeds, pesticides, farm
equipment’s, and new technologies on cash and credit bases and searching for
their community. From this, it is possible to see that cooperative unions in Tigray
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are playing a vital role in the food security program as well as in attaining the
measuring the results of the firm’s policies and operations in monetary terms.
These results are reflected in the firm's return on investment, return on assets,
value added and one final way of evaluating financial performance is to simply
Yuvaraj and Biruk (2013) posited that, the financial health on the liquidity
position of Gohe cooperatives saving and credit union indicated that unhealthy
union may fail to satisfy the deposit withdrawal request due to the fact that the
union has no liquid reserve funds to come across the request; deteriorating
liquidity position provides members with unsafe place to deposit their money.
saving and credit union for delinquent loan is greater than 12 months and 1-12
the union is survive in a safe status on protection in the study period and the
solvency position also comply with the WOCCU model. However, Gohe
cooperatives saving and credit union has not followed the specified policy for
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loan loss provision, bad debt written of, and no delinquency report due to the fact
that the credit policy followed in the union is stringent and they make loan
recovery for any loan delinquent from the balance of defaulters or from the
empirically concluded that there are many other factors which affect the financial
which causes problems of ineffective resource allocation in their use; high loan
not only changes within the enterprises, but also government and cooperative
economic and political scenarios determine their success and failure. Mostly the
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potential of cooperatives and the extent of their development have in many cases
during the consecutive years. This is because of the difference in the amount of
the loan from year to year with the results for fluctuating in interest payable.
Here, the impact of borrowing has shown in decreasing the liquidity ratio.
cooperatives taking the two years financial data (2001/2 and 2002/3) in the study
districts. The liquidity analysis showed that the cooperatives under investigation
were below the satisfactory rate (a current ratio of less than 2.00) for two
consecutive years.
All of the cooperatives (WAC, 2009) under investigation in the two districts
use financial leverage (financed more of their total asset with creditor’s fund that
is on average 89.35 per cent of the assets of the cooperatives was financed with
Jemal (2008) stated that the profitability ratio of the cooperatives under
investigation in the two districts showed that the profitability of the cooperatives
was weak. All the cooperatives earn return on their asset below the interest rate
the financial institution extend credit. The debt ratio shows the financial risk that
are handicapped by their lack of negotiating power in the global economy. Coffee
Thus, the coffee cooperatives have provided higher profits to coffee farmers than
recently, and it is not yet clear how they would survive a downward international
price trend.
Bromley (2010) said that the collective actions of cooperatives are more
effective than separate actions of individuals. Destahun (2007) also stated that
opportunities for themselves, find a productive work that not only facilitate their
wellbeing and stability but also give them the support they need to improve their
role both in rural and urban areas. Primary cooperatives created 76,956
employment opportunities in the country (FCA, 2009). The free market economic
smallholder farmers, resource poor youth (who aim to enter into business
operation) and poor consumers (due to limited financial resources, limited skill
whole.
human body. In the same way, finance is absolutely necessary for the survival
purchase fixed assets, buy raw materials, produce goods and market them.
Without finance, the business would come to a halt. Therefore, finance is the
the goals. It has been rightly stated that business needs money to make more
utilization.
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economic world. Any kind of business activity depends on the finance. Hence,
concerns are big or small, they need finance to fulfill their business
activities.
Bakhit G.R (2016) states that the study stated that the numerous results,
and they care about the financial analysis of the financial operations of the
in commercial establishments.
business must have the proper cash flow to pay the day- to-day expenses
rent, electricity bill, etc. If the business has a good cash flow, it can take
healthy cash flow improves the chances of survival and success of the
company. Also gives strength against competition and the ability to make
acquisitions.
Financial decision will affect the entire operation of the concern. Because there is
because it helps the organization to determine thei goal and it serves as a guide
minimize risk in the business and to know the proper use and allocation of funds
Chase and Zhang (1998) stated the common belief amongst the people
was to believe that the operations management was important only in the
manufacturing industry. The belief was supported with the fact that the
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operations starting from obtaining the raw materials till the goods are sold and
also in many cases after sales assistance also was considered hence creating
Dr. Sarbapriya (2012) states that the study tries to investigate the
Indian manufacturing firms for a period of 14 years from 1996-97 and to 2009-10
and have studied the effect of different variables of working capital management
payment period, cash conversion cycle and current ratio debt, debt ratio size of
the firm and financial assets to total asset ratio on the net operating profitability of
Indian firms.
as buying, selling and using money to its best results to maximize wealth
Galloway (1993) argues that “the operations management is all about the
decisions relating to working capital and short term financing. These involve
managing the relationship between a firm’s short term assets and short term
liabilities. The goal of working capital management is to ensure that the firm is
able to continue its operations and that it has sufficient cash flow to satisfy both
maturing short term debt and upcoming operational expenses. The context of
expenses, and cash and accounts receivable of the business. In order to ensure
George and Jerry, “There are four fundamental functions of management i.e.
performance”.
Gitman, Lawrence (2003), stated that “Working capital (also known as net
working capital) is a financial metric which represents the amount of day by day
operating liquidity available to a business. Along with fixed assets such as plant
A positive change in working capital indicates that the business has either
increased current assets (that is received cash or other current assets) or has
decreased current liabilities, for example has paid off some short term creditors.
Working capital refers to the firm’s current assets while net working capital
refers to current assets less current liabilities. Current ratio and quick ratio both
time, money and risk and how they are interrelated. At the individual level,
resources of the individual while from the organizational perspective the process
use of funds.
decisions corporation make and the tool and analysis used to make the
every department need to finance to meet their daily requirements that’s mean
Gupta and Boyd (2008) stated that in case of the service industry they
customer needs to getting a feedback on the service and hence at some point
the service industry tells the manufacturing industry what they want and hence to
product or a service then that company has to make sure that the customers’
needs and demands are met all the time. This is a very important process.
reducing their inventory size, cash conversion cycle and net trading cycle.
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Increase in liquidity and time period to supplier will also lead firms’ overall
performance.
Henry Fanyol, stated that “To manage is to forecast and plan, to organize,
‘POSDCORB’ where P stands for planning, O for organizing, S for staffing, D for
overlapping in nature.
Irina Kuzmina – Merlino (2015) states that the findings show that there is
a growing need for the development of the financial management system that
business companies that would be aimed at meeting the strategic goals of the
company.
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operations can prove very effective and profitable on the other hand failing to
the financial performance, the study established that majority of the CDF funded
projects managed the fund moderately since they fairly embraced and
performance.
its working capital management that is used in the production that is very
the required output (services) having the requisite quality level. Management is
the process, which combines and transforms various resources used in the
operations management.”
way, it is seen as set of activities which carefully plans, organizes, leads and
operations.
understands for scholars who .are new to the broad field of financial planning
research.
Moqvist J. (2011) states that the analysis shows that the budget works as
a link between decisions taken on the strategic level down to task level. The
coordinates and controls their activities. And the budget serves the purpose of
allocating scarce resources. The budget utilized by the company to assure the
monitoring.
Ma. Flordeliza Anastacio, PhD, CPA, et.al, 2010 in order for a business
manager must be able to plan ahead. Management must be flexible and make
should be considered because the firm can measure how they can maximize
wealth and company market value if it would be able them to draw capital.
survive in their needs. They can plan easily in doing their fund allocation
what is to be done in the future. Most decisions have long leads time which
means they take a long time to implement. It formulates the sensible decisions
about money that can help the company in achieving their goal. This plan
throughout the world and research on the topics generally focuses on two key
and (2) determining how well a company and its major competitors are
water refilling stations is very much important because we can see the flow of
money.
as possible over the volume, mix and return or cost of both asset and
need to develop their fund management to maintain the cash flow of the
company, and the proper control of their cost and asset to avoid the risk
goal.
clarifies who does, what, why and how of the organization. In directing, it
compares plans with the actual performance to identify the strengths and
sure that the financial resources of the organization are properly handled
be based on cash flow and risk. Provides information on payback period; return
on capital employed, earnings per share effect, working capital, profit planning,
of the careful analysis. An organization must know how to plan for their funds.
Financial planning can help them to allocate their funds and achieving
their financial activities in order for them to minimize the risk of error that
advance, thus maximizing the risks of errors brought by making choices in the
know how to plan for their funds and achieving their goals in the future. In making
decisions a company should manage their financial activities in order for them to
managing each part of working capital, a company can increase the net
present value of its cash flows Proper management of asset and capital is
lessen the possible conflict on the operation of the business and its
decisions relating to how much and what types of assets to acquire, how
to raise the capital needed to purchase assets, how to run the firm so as
finance which deals with the management of all financial resources of the
Generally, firm are the corporation are the purposes for which the finance
functions are carried out. They provide criteria for financial decision making
and are essential for right financial decision, financial manger takes goals
business you must be able to plan for the future of the organization on a
realistic way. Make sure the money is being spent in the most efficient
and effective way and being spent to fulfill the objective of the
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in day to day life and in planning for your business and know how to
system should ensure that costs are properly categorized, tracked and
charged to the appropriate accounts, and that managers are able to report
requires efficient and effective from the finance division of the organization.
and efficient in their finance so that the business will achieve their aims
and objectives. The business must have proper financial decisions. The
well the finances in the business. With the help of financial management,
the business can survive in the competitive business world. It must be very
them to improve members, creditors and other people they transact with to
understanding of the current financial situation of the cooperative thus they are
able to know how they shares are being invested and used.
Future researchers. This study will be a good research material and can
be used as baseline data for their own studies if it is related to the subject
METHODOLOGY
Research Design
Cordon, Isabela
conditions, benefits, proves, trends and accurate interpretation about data with or
method goes beyond mere gathering and tabulation of data. It involves the
Gonzalez, 2005)
offices located at Wigan, Cordon, Isabela and satellite office at Diadi, Nueva
Vizcaya.
Instruments or Materials
The financial statement of the cooperative was used to gather the needed
data in the liquidity, profitability and stability ratios of the cooperative. The
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financial statements of the years 2013 to 2017 will be provided by the accountant
of the cooperative and a hard copy together with the notes to the financial
Data Analysis
Figures obtained from the hard copy of the financial statement of Wigan
Settlers Multipurpose Cooperative was used to compute for the liquidity, stability
and profitability ratios that are needed to determine the financial performance of
Ethical Considerations
1. The dignity and well-being of the members was protected at all times.
to interview check the financial statement of the cooperative from the year
2013 to 2017.
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RESULTS
the five year financial performance of the cooperative in terms of its financial
terms of:
1. Liquidity Ratios
Liquidity Ratio provides information about the firm’s ability to pay its
The table also shows the ratio of current assets in relation to the total
assets were from the period of 2013 to 2017 the ratios are 97%, 988%, 98%, and
relation to the total assets. It is only during 2017 that the liquidity saw a decrease
to 83%.
The table also shows how the cooperative is able to pay its short term
debts from its most liquid assets with the years 2013 to 2017 showing a very
good ratio where there are almost 2 times more assets to pay for their liabilities
while in the year 2017 there is a slight decrease to 1.86 but still they are able to
pay their short term debts thru their most liquid assets.
2. Profitability Ratios
statement.
The table shows an average of 38% on the rate of return on the capital of
the cooperative with the years 2014, 2015, and 2017 showing the strongest ratio
of 42%, 43% and 40% return on equity ratio respectively, the years 2016 and
2013 shows the weakest ratio of return on equity of 30% and 37% respectively.
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The table also shows the gross profit ratio of the cooperative where the
desired profit is shown with enough revenue to be able to cover the operating
shown which keeps to the profitability of the cooperative and being able to cover
the operating expenses needed to pay for different expenses incurred in the
operation of the cooperative still leaving enough profit for the shareholders of the
company.
The table also shows net profit margin of the cooperative in comparison
with the total sales of the company with 2013 and 2014 being the strongest with
a profit margin of 65% and 50% respectively. In the years 2015 to 2017 there is a
noticeable decrease in the net profit margin with a 32%, 23%, and 25% net profit
3. Stability Ratio
supported by the company and whether debt and equity are balanced.
The table shows the ratio of debt in relation to the equity the ratio varies
from year to year with the year 2017 having 90% or the lowest and the year 2015
69% or the highest. The ratio shows that resources provided by creditors of the
The table also shows the equity to debt ratio wherein it measures the
margin of safety for the creditors with the years 2014, 2015, and 2016 showing a
strong ratio of 1.31, 1.44 and 1.40 respectively. The years 2013 and 2017 shows
a ratio of 1.121 and 1.10 respectively. The table means that although there are
fluctuations in the equity to debt ratio the cooperative still has a high margin of
The table also shows the owner’s equity to total assets with a percentage
showing that majority of the total assets of the cooperative are provided by its
cooperative are in effect willing to risk their shares because they are confident of
The table also shows what is percentage of the total assets of the
operating years of 2013 – 2017, which indicates that creditors are steadily
providing the cooperative with their steady share in the computed total assets of
the establishment.
The table also shows the operating ratio of the cooperative where it
indicates how much of the operating expenses is being covered by the net sales.
The year 2013 shows the strongest with a ratio of 1.07:1, the years 2014, 2016,
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and 2017 shows a fluctuation in the ratio with 1.14:1, 1.15:1 and 1.13:1
respectively.
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DISCUSSION
Summary of Findings
Cooperative is excellent basing from the different ratios computed in its liquidity,
Liquidity
As to the liquidity ratio of the cooperative the short term solvency of the
cooperative is at a level where it shows that the current assets are able to cover
for the current liabilities being incurred by the company. The cooperative shows a
decrease in its liquidity only during the year 2017. But they are still able to pay
their short term debts by the use of its most liquid assets wherein the ratio of their
Profitability
increased on the shareholders although it is not high enough it is still on the level
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that the members and administrators of the cooperative are able to show profit
Stability
the equity to debt ratio the cooperative still has a high margin of safety to its
cooperative are in effect willing to risk their shares because they are confident of
the stability of the establishment. It also indicates that creditors are steadily
providing the cooperative with their steady share in the computed total assets of
the establishment.
needs to understand how a simple cooperative with its shareholder are able to
produce a revenue from such small capital that they have started with and able to
convert it into a multimillion peso business both benefiting the company and its
shareholders.
Basing from the baseline data gathered from this study it could be more
able to liquidate such huge assets by not overspending on it and instead able to
make this liquid assets as their main ingredient in making bigger revenues for the
cooperative.
It is also suggested that more in depth analysis be given to what are the
privileges that cooperatives have over private enterprises owned thru single
proprietorship when it comes to tax incentives and other subsidiary benefits given
Conclusions
Here are some of the conclusions as seen from the financial performance
utilizing its assets. The administration must find ways to maximize the
use of its assets so that they will be able to maximize the income
increasing the assets they can use for a better financial performance
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