However, higher expenses, especially for labor, continue to eat into the bottom line, as illustrated in the slumping profitability ratios, examined below. While some cooperatives are positioning themselves for the 21st century, others may find the next century will not be so favorable. Activity, which shows the efficiency with which the cooperative uses its assets. Profitability, which shows the net return on the cooperative's operations. The most common liquidity ratios used today are the current and quick ratios.
Liquidity implies the ability to convert assets into cash in the current period.
Liquid assets include cash, marketable securities, accounts receivable, inventories and other debt that is to be paid to the cooperative within the current fiscal year. Figure 1 illustrates both current and quick ratios from 1992 to 1996. The current ratio is calculated by dividing total current assets by total current liabilities. As figure 1 shows, the liquidity of the largest agricultural cooperatives has slowly eroded since 1993. The major cause of this decline was the increased reliance on short-term debt over the past few years.