Agricultural Economics Department
Date of this Version
12-2-2009
Abstract
Cooperatives differ from other businesses in that they are owned by their patrons and net margins are distributed to patrons on the basis of use instead of capital investment. For financing, cooperatives often rely on allocated equities from retained patronage refunds. Retained patronage refunds are noncash allocations of net margins reinvested in a cooperative by patrons. Under an ideal program of equity formation, equity is held by patrons in proportion to patronage. Each patron’s share of financing the cooperative is equal to the share of benefits received. Equities of former patrons are retired as active patrons take on more of the responsibility of financing the organization.
Comments
Published by the Department of Agricultural Economics, University of Nebraska – Lincoln. Copyright 2009 Regents of the University of Nebraska.