Unit 1. The Cooperative Form of Business. What is a Cooperative?. A special type of business (usually corporate) owned and controlled by its member patrons . This is in contrast to ordinary corporations that are investor-owned firms (IOFs). Basic Philosophy of Cooperatives.
The Cooperative Form of Business
User of the business
(buyer of inputs
seller of products)
NOTE: Co-op patrons not always ‘members’.
$ amount or
$ volume of business done with a cooperative
= Serving Dual Interests of Owners as:
(savings, surplus, profits)
are to be returned to the member
Operation at cost cost practice.
= PATRONAGE REFUNDS
2. Investors in proportion to the amount of money invested in stock in the business (i.e. return on INVESTMENT) = DIVIDENDS
Earnings: $ 20,000
Purchases: $ 8,000
% of total for co-op 4%
(8,000/200,000 = 4%)
Patronage Refund: $ 800
(4% x 20,000 = 800)
The noncash patronage refund is also called a retained or deferred patronage refund.