Date of this Version
Cornhusker Economics, University of Nebraska–Lincoln Extension, March 11, 2015.
Agricultural cooperatives must frequently make decisions about how best to apply the net earnings they receive from business with their members. Net earnings can be used to pay cash patronage refunds, accumulate equity capital for growth, or retire equity certificates held by current and former members. These uses of net earnings compete with one another, and all depend on the cooperative’s rate of return on equity. If a cooperative increases one use of its earnings, it must either decrease another or take steps to improve its rate of return.