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Business LibreTexts

2. Glossary

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    4274
  • The accounting identity states that Total Assets is equal to the sum of Total Liabilities and Total Equity.

    Allocated equity is sometimes called Patronage Ledger Credits, Retained Refunds, Capital Retains, or Revolving Capital, and is the value of the patronage refunds retained by the cooperative equity. The word allocated is used to denote that this is equity, which has been allocated to the member based on patronage.

    Articles of incorporation for a cooperative describe the type of organization, purpose, number of shares of common stock and any preferred stock, number of directors and how a member votes on those directors, legal definition of membership, location of the headquarters (the legal address for the cooperative), and asset disposal upon liquidation.

    Bargaining cooperatives negotiate with processors and other first handlers for a collective price and terms of trade for their members.

    Bylaws are the rules or policies that explain how any organization, including cooperatives, operates. The bylaws of a cooperative define the purpose of the cooperative and its geographical location, who a member is and what rights are associated with membership, how disputes are addressed, how membership may be terminated, how the organization can change its rules and policies, how a meeting of the membership is to be held, and what can occur at that meeting.

    The cooperative as a competitive yardstick is a well-known analogy for justifying why cooperatives are often thought of as promoting competition because they allow members to join together to obtain marketing power to negotiate on behalf of their members.

    Cooperation refers to businesses formed for mutual benefit, controlled by users who are customers, and operated principally to provide benefits to users. The benefits are provided to users based on participation, not ownership, and include the purchasing or selling business transactions customers have with the cooperative and the profits earned by the cooperative on those transactions that are returned to the users.

    In a consumer cooperative, the goods and services provided by the cooperative are consumed by the members.

    Electric utility cooperatives were developed in the 1930s to provide electricity. In the 21st century, many are providing internet capability through satellites or broadband.

    Free rider problem exists when the value of membership is diluted because nonmembers can share in benefits without having to be a member.

    Health care cooperatives are a lot like mutual insurance firms in that their objective is to pool risk across members and provide health care with lower fees.

    A housing cooperative owns the land, facility, and common areas such as indoor or outdoor recreational equipment and common meeting space. Members buy a share in the cooperative, which is an ownership interest in a unit within the housing cooperative. There are many types of housing cooperatives. Members pay a monthly fee for budgeted expenses such as operating costs and capital investments to maintain the cooperative’s assets.

    Governance is a system of system of processes by which a company is directed and controlled. Governance of cooperatives involves balancing the interests of the members with the goals of the cooperative as a business.

    Make-or-buy decision refers to a decision by a producer or consumer to make a choice of vertically integrating through their membership in the cooperative to produce a product or simply buying it from the market.

    A marketing agency-in-common is a cooperative whose members are other cooperatives who have joined together to jointly market the products of all members.

    Marketing year For many agricultural crops that are processed as ingredients into other food products or processed into a consumer product, the value of the crop grown by the producer as a raw material for these ingredient and consumer products is not known at harvest but becomes known over the next 12 months as the supply of the crop is processed and before the new harvest occurs. This 12-month period is known as the marketing year and in the northern hemisphere typically begins September 1 or October 1 in the current year, which is harvest when the supply of the crop is greatest, and ends August 31 or September 30 of the next year.

    Mutualism is often linked with mutual insurance firms which are owned by their policyholders, and income is retained to reduce future insurance premiums.

    Participation describes how a member uses the cooperative to share in its benefits. Investor-benefit businesses do not require participation in the business as a customer.

    Patronage refund is analogous to net income, but is income from doing business with members which is linked with a members’ participation in the cooperative. It is the patronage income derived from the operation of the cooperative on a cooperative basis.

    In a producer cooperative the cooperative markets products supplied by members.

    A property right is a legally enforced right to select the uses of an economic good produced by a firm

    Unallocated equity, which can be thought of as unallocated, retained earnings, or Unallocated Reserves or Surplus, is equity not allocated to the member based on their patronage. For most cooperatives, this is non-patronage income or any other income on which the cooperative has paid corporate income tax.

    A worker cooperative is a business entity that is owned and controlled by the members who are laborers and work in the business.