Abstract
Cooperatives are one of the most important types of companies in the agricultural sector. Cooperatives allow overcoming the limitations of the fragmentation of agricultural property, increasing the level of production of small-sized farms and selling the product so that it reaches a sufficient critical mass. Moreover, cooperatives are often characterized by undercapitalization and even difficult credit access because banks conduct their analysis applying rating systems that do not take into account the typicality of the cooperative budget. To assess this topic, in this article, an analysis has been conducted on a sample of 100 cooperatives, making adjustments to the annual budget in order to consider the typicality of their annual accounts. The results of the analysis show that suggested adjustments allow a more correct expression of the economic results and capital adequacy of the cooperative and that the results, expressed in terms of scoring, are higher than that achieved by a traditional analysis. This methodology could improve the credit access capacity for agricultural cooperatives and then reduce financial constraints, particularly in developing countries.
Highlights
Scarcity of capital, individual farmers can join a cooperative and start a business of which they are Cooperative enterprises are of great importance in the members
The analysis in this article, applied to a sample of agricultural cooperative firms operating in the Mediterranean Basin, shows that cooperative firms suffer from the traditional form of annual accounting because this does not correctly show the profit and the level of corporate debt
The analysis shows that the ratios of profitability (ROE, Return on Asset (ROA)), cost of debt (ROD) and debt level (DER) are statistically different when calculated for reclassified and nonreclassified annual accounts
Summary
Scarcity of capital, individual farmers can join a cooperative and start a business of which they are Cooperative enterprises are of great importance in the members. This overcompensation reduces the profit of the cooperative and allows the distribution of the share of profits with direct remuneration of the members, paying a price higher than the market price of the agricultural raw materials conferred (Albaek and Schultz, 1998) To analyze this topic, the most important database is the cooperative’s annual account (budget). It is necessary to reclassify the income statement, reducing the purchasing cost of raw materials in the annual account for an amount equal to overremuneration at the market prices and to increase profit for the same amount (assuming that there is no difference in taxation) This is a situation in which it is convenient for members to confer agricultural products in the cooperative compared with selling these in the market.
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