In this case, management may need to re-examine marketing policy. Financial ratios are computed from an organization's income statement and balance sheet. Financial ratios are meaningful only when compared to cooperative industry averages over a set time period. Computing financial ratios is similar to taking a snapshot because the ratios reflect the fiscal status of a cooperative at just one point in time. Comparing ratios to industry averages is essential for uncovering positive and negative trends affecting your cooperative business.
Trend analysis is an excellent way to identify a cooperative's strengths and weaknesses.
This report examines some key financial ratios, based on a 1994 survey conducted by USDA Cooperative Services of 603 agricultural cooperatives. The objective is to provide local cooperatives with a basis to compare their operations to industry averages. The ratios examined below include growth, liquidity, leverage, activity and profitability. Overall, this analysis shows that cooperatives appear to be positioning themselves quite well for the future. The tough times in the late 1980s forced many cooperatives to either go out of business or merge with other cooperatives.