Sugar cooperatives did not produce enough revenue to cover their investments so they experienced a significant drop in their fixed asset ratio. Revenue for farm supply cooperatives was greater than investment, but one cooperative had such a dramatic drop in its ratio that is depressed the overall average turnover ratio for that commodity group. Because cooperatives often have other objectives in addition to generating returns for their members, their profitability ratios may be lower than for investor-owned firms. However, comparisons for a single cooperative or group of cooperatives over time can be very informative. The four profitability ratios used in this report include gross margin percent, net operating margins, return on total assets and return on member equity.
Gross margins are the excess of revenues above the cost of goods sold.
All operating and non-operating expenses plus payment of patronage refunds, dividends and income taxes must be covered by the gross margins. Gross margins also indicate the pricing policy of the cooperative. In other words, is the cooperative charging enough for the products sold or paying too much for member products to cover its expenses. Figure 7 illustrates the five-year trend for average gross margin as a percent of total revenue for the nation's 100 largest agricultural cooperatives. Although gross margins have increased during this time, gross margins as a percent of total revenues have dropped.