Wigan For Bookbding.docx

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Introduction Collective actions of cooperatives are more effective than separate actions of individuals meaning that when the efforts of more people are pooled together they would be able to accomplish more than the action of just one person. Through cooperatives, individual households and communities can create opportunities for themselves, find a productive work i.e. (selling of farm inputs, production of farm produce) that not only facilitate their wellbeing and stability but also give them the support they need to improve their lives and remain active in civil rights and political arenas (Destahun, 2007). Data compiled by International Cooperative Alliance (ICA) (RBAP, 2009) indicated that cooperatives have increasingly become the sources of secured employment and income for millions of the world’s population. Over 800 million people are members of different cooperative societies in the world (Mekonnen et al., 2007). Finance is the life blood of a business. Circulation of blood is necessary for maintaining life in human body (Srinivasan R: 2010). In the same way, finance is absolutely necessary for the survival and smooth running of business. Finance is necessary to promote a business, purchase fixed assets, buy raw materials, produce goods and market them. Without finance, the business would come to a halt. Therefore, finance is the fundamental requirement for cooperatives, to carry on operations and achieve the goals. It has been rightly stated that business needs money to make more money. Finance may be defined as the

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provision of adequate amount of money when it is required. As a management function, it has a wider meaning. Finance function is concerned with the procurements of funds and their effective utilization. Measuring the results of the firm’s policies and operations in monetary terms, these results are reflected in the firm's return on investment, return on assets, value added, etc. One final way of evaluating financial performance is to simply compare financial statements from one period to another period and to compare financial statements with other companies. This can be facilitated by vertical and horizontal analysis (Lakew, 2014).

Background of the Study Wigan Settler’s Multi-purpose Cooperative (WSMPC) is an agricultural based organization originally formed by 15 settlers in August 1983 with the help of an American Linguistics with the assistance of the Philippine Assistance for Intercultural Development (PAFID) to help the settlers fight for their rights to the National Irrigations Administration (NIA). It started its operation since 1986 with only one program on credit re-lending. Today it has expanded to seven services such as Providential Loan, Productive Loan, Special Loan (collateralized loan), and Salary Loan, Savings and Time Deposit, Consumer Store, Agricultural Inputs Trading with one satellite consumer store as Barangay Dallao, Cordon, Isabela and one satellite office at National Highway, Diadi, Nueva Vizcaya and has expanded its service to adjacent provinces like, Ifugao, Nueva Vizcaya, and Quirino.

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Since then it has increased its working capital and due to this has increased its membership where financial statements are reported annually to all its shareholders to inform them of the current financial state of the cooperative. It is due to this that this study would like to gather the perception of both employees and shareholder/members on the financial performance of the cooperative. Statement of the Problem This study found out the financial performance of Wigan Settlers Cooperative for the Fiscal Years 2012-2017. It seeks to answer the following: 1. What is the financial performance of Wigan Settlers Cooperative from 2012 to 2017 in terms of: 1.1 Liquidity 1.2 Stability 1.3 Profitability 2. What are the problems encountered by the respondents to improve the financial performance of Wigan Settlers Cooperative? 3. What measures can be proposed to improve the financial performance of Wigan Settlers Cooperative? Theoretical Framework Theories are formulated to explain, predict and understand phenomena and, in many cases, to challenge and extend existing knowledge within the limits

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of critical bounding assumptions. The following theories could be used as guides in the conduct of the present study. The Prospect theory describes decisions in two stages – editing and evaluation. In the first process the possible outcomes of the decision are ordered following some probability. Prospect theory was developed by Amos Tversky and Daniel Kahneman in 2009. This model was developed as the psychologically realistic alternative approach to the expected utility theory. The prospect theory of economics describes how the investors can choose the right alternatives involving risks. The theory helps people to opt for the right financial decision. Interestingly, the model even considers empirical evidence in order to describe how people evaluate potential gains and losses. The study would be useful to the study in such manner that it will help the cooperative administration to better understand what are their weak points in their financial performance and thus find solutions or compromises for them to strengthen this weaknesses. Rational Choice Theory is used to understand the social and economic behaviors of the individuals. It is used in a number of academic subjects like Microeconomics, and many more. The application of the term rationality varies with the subject. Many other economic theories are concerned about the mechanism of the market that enables the production and distribution of goods. But the Rational Choice Theory is extensively used in applying the same principles that are used by other

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economic theories to understand interactions that include resources like prestige, time and many more. According to the Rational Choice Theory, each and every kind of social contact or social interaction is treated as a method of social exchange. If the action is economic, the term ‘exchange’ is used to denote the exchange of certain goods and various services but if the exchange is social, interchange of behaviors and approvals takes place. Again, to keep the social and economic action parallel to each other, the Rational Choice Theory considers reward and punishment as benefit and cost respectively and the theory holds that the human action is dominated by their desires of getting good rewards. This theory could also be implemented in the conduct of this study because the goal of the cooperative movement is to be able to empower the actions of individuals working as a group to achieve their economic goals. Related Literature and Studies Performance measurement is defined as the process of quantifying efficiency and effectiveness. Effectiveness is compliance with customer requirements, and efficiency is how the organization’s resources are used to achieve customers’ satisfaction levels. Financial performance deals with measuring the results of the firm’s policies and operations in monetary terms. These results are reflected in the firm's return on investment, return on assets, value added, etc. The main purpose of this research is to study the financial performance of Multi-Purpose cooperative unions in Tigray Region. Eight unions are selected based on continuous auditing of the targeted unions ’. The study

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considered three years’ auditing report with regard to quantitative data analysis using financial analysis tools, such as liquidity ratios ,leverage, profitability ratio Trend analysis of balance sheet and income statement, and Ratio analysis for the period of 2000 to 2003(E.C). Lakew (2014) stated that the result of financial performance analysis illustrated that the financial position of the unions has not maintained satisfactory level of financial assessment; since the Liquidity ratio of the union is not sound enough under the study period. The study results indicated that the borrowing power of the unions and the profitability of the unions are lower than the average. The Asset utilization of the unions is not satisfactory and the unions have to sale additional share capital and unproductive fixed asset to increase own fund. To improve their efficiency in order to gain enough profit ,and to save accumulated profit the unions must decrease administrative and operating expense which eventually lead to maximizing profits. Especially the finding of Profitability, Liquidity, Leverage and return on assets are below the average. Micahel (2011) stated that specially, the Multi-purpose Cooperatives, primary and secondary Unions are organized in the rural agricultural areas. They are owned by farmer-members whose major occupation is agriculture. Thus, their major function is to supply farm inputs; fertilizers, quality seeds, pesticides, farm equipment’s, and new technologies on cash and credit bases and searching for market outlets for farmer-members’ produce. Besides, they deliver basic consumer goods and house furniture at reasonable price to member-owners and their community. From this, it is possible to see that cooperative unions in Tigray

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are playing a vital role in the food security program as well as in attaining the Millennium Development Goals in the rural. The financial performance is measuring the results of the firm’s policies and operations in monetary terms. These results are reflected in the firm's return on investment, return on assets, value added and one final way of evaluating financial performance is to simply compare financial statements from period to period and to compare financial statements with other companies. This can be facilitated by vertical and horizontal analysis.The study analyzes the financial performance of the unions through measurement of profitability analysis, liquidity analysis, solvency analysis and efficiency analysis from investment by standard ratios analysis. Yuvaraj and Biruk (2013) posited that, the financial health on the liquidity position of Gohe cooperatives saving and credit union indicated that unhealthy condition. According to WOCCU Published by European entre for Research Training and Development UK (www.ea-iournals.org) proposed standards the union may fail to satisfy the deposit withdrawal request due to the fact that the union has no liquid reserve funds to come across the request; deteriorating liquidity position provides members with unsafe place to deposit their money. Yaron (2012) stated that the solvency or protection of Gohe cooperatives saving and credit union for delinquent loan is greater than 12 months and 1-12 months. There is 100% protection of delinquent loans outstanding that enables the union is survive in a safe status on protection in the study period and the solvency position also comply with the WOCCU model. However, Gohe cooperatives saving and credit union has not followed the specified policy for

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loan loss provision, bad debt written of, and no delinquency report due to the fact that the credit policy followed in the union is stringent and they make loan recovery for any loan delinquent from the balance of defaulters or from the accounts of guarantors which enables to have hundred percent solvency or protection to cover the possible loan losses from doubtful loans. Nadezhda (2009) said that, the financial performance of marketing cooperative enterprises operating in the agro-food market was examined empirically concluded that there are many other factors which affect the financial performance of the food cooperatives. Some of them are weak management, which causes problems of ineffective resource allocation in their use; high loan burdening and low liquidity levels; under developed marketing management, including the absence of certain market niches and non-recognizable brand names; and lack of knowledge concerning the rural society. Furthermore, (Debre Markos University, 2013) the absence of competitive market strategies such as product differentiation, market segmentation, specialization, and diversification, prevents increases in profit margins and expansions in demand. To overcome the problems which were mentioned above, not only changes within the enterprises, but also government and cooperative organizational supports are required. Tsegay described, (2008) the system of cooperatives is suffering by many problems like poor management and corruption. Furthermore, despite of its inherent characteristics of cooperative, it is true that different social, cultural, economic and political scenarios determine their success and failure. Mostly the

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potential of cooperatives and the extent of their development have in many cases failed due to low standard of performance and bad management. Alema (2008), the liquidity ratios of the cooperatives were fluctuating during the consecutive years. This is because of the difference in the amount of the loan from year to year with the results for fluctuating in interest payable. Here, the impact of borrowing has shown in decreasing the liquidity ratio. Therefore, cooperatives should increase their capital to minimize the loan. Jemal, (2008) also used ratios analysis to evaluate performances of cooperatives taking the two years financial data (2001/2 and 2002/3) in the study districts. The liquidity analysis showed that the cooperatives under investigation were below the satisfactory rate (a current ratio of less than 2.00) for two consecutive years. All of the cooperatives (WAC, 2009) under investigation in the two districts use financial leverage (financed more of their total asset with creditor’s fund that is on average 89.35 per cent of the assets of the cooperatives was financed with creditors fund in the two years). Jemal (2008) stated that the profitability ratio of the cooperatives under investigation in the two districts showed that the profitability of the cooperatives was weak. All the cooperatives earn return on their asset below the interest rate the financial institution extend credit. The debt ratio shows the financial risk that is as debt becomes an increasing percentage of the cooperatives’ financing source, the cooperatives face inability to meet debt obligations. Sarmiento (2013) said that in Ethiopia, several coffee farmers’

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multipurpose cooperative unions have been established to support peasants who are handicapped by their lack of negotiating power in the global economy. Coffee cooperatives have become more market-oriented and are now relatively democratic compared to the former Marxist cooperatives of the previous regime. Thus, the coffee cooperatives have provided higher profits to coffee farmers than have private traders. Kudama (2007) stated that the actual volume of purchase, however, it is limited due to financial constraints. Because of this, the majority of cooperatives continue to rely on conventional marketing channels rather than on unions. Considering their weak financial condition, it is too early to judge the sustainability of the cooperatives because international prices have been high recently, and it is not yet clear how they would survive a downward international price trend. Bromley (2010) said that the collective actions of cooperatives are more effective than separate actions of individuals. Destahun (2007) also stated that through cooperatives, individual households and communities can create opportunities for themselves, find a productive work that not only facilitate their wellbeing and stability but also give them the support they need to improve their lives and remain active in civil rights and political arenas. Likewise, the cooperative societies in Ethiopia are playing multi-functional role both in rural and urban areas. Primary cooperatives created 76,956 employment opportunities in the country (FCA, 2009). The free market economic system posed challenges of poor bargaining power and competitiveness for

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smallholder farmers, resource poor youth (who aim to enter into business operation) and poor consumers (due to limited financial resources, limited skill and capacity, fragmented efforts, etc.). Thus,

(Mclnerney,

2014)

collective

efforts

through

cooperative

organization have been chosen by many of the disadvantaged groups to increase their benefits from the liberalized market system. Cooperatives in Ethiopia

are

mainly

economic

entities

performing

economic

functions,

contributing a lot to economic development of the country and are believed to contribute more to the living standard of members and the community as a whole. Ramachandran R &Srinivasan R., (2010) stated that finance is the life blood of a business. Circulation of blood is necessary for maintaining life in human body. In the same way, finance is absolutely necessary for the survival and smooth running of business. Finance is necessary to promote a business, purchase fixed assets, buy raw materials, produce goods and market them. Without finance, the business would come to a halt. Therefore, finance is the fundamental requirement for cooperatives, to carry on operations and achieve the goals. It has been rightly stated that business needs money to make more money. Finance may be defined as the provision of adequate amount of money when it is required. As a management function, it has a wider meaning. Finance function is concerned with the procurements of funds and their effective utilization.

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Business concern needs finance to meet their requirements in the economic world. Any kind of business activity depends on the finance. Hence, it is called as lifeblood of business organization.

Whether

the

business

concerns are big or small, they need finance to fulfill their business activities. Bakhit G.R (2016) states that the study stated that the numerous results, such as the relationship between financial management and financial planning, take appropriate decisions in the process of regulation in the organization and carry out investment decisions in commercial establishments. The financial management in commercial enterprises is not independent of other departments and they care about the financial analysis of the financial operations of the institution.

It is concluded that the initial hypothesis showed a relationship

between the adoptions of financial management decision of the planning process in commercial establishments. Binoy

Jhon

Vargese

(2015) stated that,

Strategic

Financial

Management refers to both, financial implications or aspects of various business

strategies

and

strategic

management

of

finance.

approach to management that relates financial techniques,

It

is

an

tools and

methodologies to strategic decisions making or have a long term futuristic perspective

of

sustenance

and

financial

wellbeing

competitive

edge

of

the

firm

consistently.

to

facilitate

Strategic

growth, Financial

Management also deals with investment decisions, financing decisions, liquidity decisions, dividend decisions, and profitability decisions. A water

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refilling

station

needs

to

have

the knowledge

in

strategic

financial

management, because it helps the business to become effective. The business must have the proper cash flow to pay the day- to-day expenses such as purchasing of raw materials, the payment of wages and salaries, rent, electricity bill, etc. If the business has a good cash flow, it can take advantage

of

many opportunities

such as taking cash

discounts

on

purchases, large-scale purchasing, and giving credit to customers, etc. A healthy cash flow improves the chances of survival and success of the company. Also gives strength against competition and the ability to make acquisitions. Bucao

(2011),

stated

that

financial

decision

personal

financial

management helps to take sound financial decision in the business concern. Financial decision will affect the entire operation of the concern. Because there is direct relationship with various department functions such as marketing, production, etc. financial decision has a big role in business organization because it helps the organization to determine thei goal and it serves as a guide to achieve the goal of a business with the help of effective management of finance. Financial decision is important in business because this is also a way to minimize risk in the business and to know the proper use and allocation of funds that leads to the improvement of operational efficiency of the business concern. Chase and Zhang (1998) stated the common belief amongst the people was to believe that the operations management was important only in the manufacturing industry. The belief was supported with the fact that the

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manufacturing industry

had to take care of more number of processes and

operations starting from obtaining the raw materials till the goods are sold and also in many cases after sales assistance also was considered hence creating the belief that the operations management is important to manufacturing industry. Collins English Dictionary (1986), stated that an operation is defined as “a process, method or series of acts especially of practical nature.” Dr. Sarbapriya (2012) states that the study tries to investigate the relationship between working capital management components and the profitability of a sample of Indian manufacturing firms using a sample of 311 Indian manufacturing firms for a period of 14 years from 1996-97 and to 2009-10 and have studied the effect of different variables of working capital management including the average collection period, inventory turnover in days, average payment period, cash conversion cycle and current ratio debt, debt ratio size of the firm and financial assets to total asset ratio on the net operating profitability of Indian firms. Dr. S.N

Maheshwari

(2018),

states that Financial

Management

is

concerned with raising financial resources and their effective utilization towards achieving the organizational goals. Financial Management is about preparing, directing and managing the money activities of a company such as buying, selling and using money to its best results to maximize wealth or

produce

management

best

value

concepts

for to

money. the

cash

It

is of

basically the

applying

company.

A

general financial

management is a big support in all business even in the business of

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Water Refilling Station. If there is a proper utilization of finance, the flow of the business will become effective and improved. Galloway (1993) states that “operations management is concerned primarily with manufacturing or the change of state of physical goods.” Galloway (1993) argues that “the operations management is all about the effective and efficient management of any operation irrespective of whether a physical good is involved or not.” Garrison (1999) states that working capital management refers to decisions relating to working capital and short term financing. These involve managing the relationship between a firm’s short term assets and short term liabilities. The goal of working capital management is to ensure that the firm is able to continue its operations and that it has sufficient cash flow to satisfy both maturing short term debt and upcoming operational expenses. The context of working capital management includes cash management, receivable and payables management, and inventory management. Working capital management involves all the managing inventories, expenses, and cash and accounts receivable of the business. In order to ensure that a firm is able to continue its operations. Different experts have classified functions of management. According to George and Jerry, “There are four fundamental functions of management i.e. planning, organizing, actuating, and controlling.” Gitman, and Lawrence (2003), states that “The objective of financial statements is to provide information about the financial strength, performance

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and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions. Financial statements should be understandable, relevant, reliable and comparable. Reported assets, liabilities and equity are directly related to an organization’s financial position. Reported income and expenses are directly related to an organization’s financial performance”. Financial statements are intended to be understandable by readers who have a reasonable knowledge of business and economic activities and accounting and who are willing to study the information diligently. Gitman, Lawrence (2003), stated that “Working capital (also known as net working capital) is a financial metric which represents the amount of day by day operating liquidity available to a business. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital. It is calculated as current assets minus current liabilities”. A positive change in working capital indicates that the business has either increased current assets (that is received cash or other current assets) or has decreased current liabilities, for example has paid off some short term creditors. Working capital refers to the firm’s current assets while net working capital refers to current assets less current liabilities. Current ratio and quick ratio both attempt to measure a firm’s liquidity and management of working capital Gitman 2011 argued that financial management refers to the concept of time, money and risk and how they are interrelated. At the individual level, financial management involves tailoring expenses according to financial

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resources of the individual while from the organizational perspective the process of financial management is associated with financial planning and control. Modern approach of financial management basically provides a conceptual and analytical framework for financial decision making. It emphasizes on effective use of funds. Financial management must be discipline in dealing with the financial decisions corporation make and the tool and analysis used to make the decisions. And they must be focus on planning, directing, monitoring, organizing and controlling of the monetary resources of an organizations in organization every department need to finance to meet their daily requirements that’s mean every activity in the organization depend upon the availability of finance. Gupta and Boyd (2008) stated that in case of the service industry they have various amounts of process involved starting from understanding the customer needs to getting a feedback on the service and hence at some point the service industry tells the manufacturing industry what they want and hence to manage operations within the service industry is as important as managing the operations within the manufacturing industry. Whenever a company is offering a product or a service then that company has to make sure that the customers’ needs and demands are met all the time. This is a very important process. Haider S. (2011) stated the findings show that working capital management has significant impact on firms’ performance and it is concluded that managers can increase value of shareholder and return on asset by reducing their inventory size, cash conversion cycle and net trading cycle.

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Increase in liquidity and time period to supplier will also lead firms’ overall performance. Henry Fanyol, stated that “To manage is to forecast and plan, to organize, to command and to control.” Whereas Luther Gullick has given a keyword ‘POSDCORB’ where P stands for planning, O for organizing, S for staffing, D for directing, Co for Coordination, R for reporting and B for budgeting. Management has been described as a social process involving responsibility for economical and effective planning and regulation of operation of an enterprise in the fulfillment of given purposes. For theoretical purposes, it may be convenient to separate the function of management but practically these functions are overlapping in nature. Investopedia, LLC (2018) operation resources

from

managers

acquire, develop

management

staff, materials, equipment and

deliver

and goods

involves

utilizing

technology.

Operations

to

based

clients

on

client wants and the abilities of the company. Irina Kuzmina – Merlino (2015) states that the findings show that there is a growing need for the development of the financial management system that would directly linked to the strategic goals of the company.

To develop

recommendations for the information for the formation of an effective financial management system based on process-oriented approach for Latvian multibusiness companies that would be aimed at meeting the strategic goals of the company.

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Karlosson and Voss (2009), Management, the effective handling of the operations can prove very effective and profitable on the other hand failing to handle it in a proper way could spell disaster to the company. Kimani, M. (2011) stated in the effect of fund management practices on the financial performance, the study established that majority of the CDF funded projects managed the fund moderately since they fairly embraced and implemented efficient fund management practices in the operations. The contribution of each variable in explaining the financial performance towards the prediction of the dependent variable based on the parameter estimate. Efficiency in receivable and cash management had the greatest effect on financial performance. Konak

and

Guner

(2016)

states

that

it

is

important

to

be

aware of the impacts of management of working capital indicators on firm performances. important business

role

of

a the

business,

Konak

and

working

capital

in

Guner the

emphasize

operation

the

of

the

of

the

and its financial management.

Working firm when

In

capital

includes

management cash

and

involves

cash

the

management

equivalents,

inventories,

trade

debtors and other receivables. In a business, even water stations have its working capital management that is used in the production that is very important in the operation and financial management of a business. Kumar & Suresh (2009) argued that “Operation is the part of an organization, which is concerned with the transformation of a range of inputs into

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the required output (services) having the requisite quality level. Management is the process, which combines and transforms various resources used in the operations subsystem of the organization into value added services in a controlled manner as the policies of the organization. The set of interrelated management activities, which are involved in manufacturing certain products, is called as production management. If the same concept is extended to service management, then the corresponding set of management activities is called as operations management.” In modern days operations management is seen in completely different way, it is seen as set of activities which carefully plans, organizes, leads and control’s the organization’s operation. This shows the importance of the operations. Michael S. Finke (2016) Financial Planning is an emerging profession supported by academic research that explores new planning techniques and understands for scholars who .are new to the broad field of financial planning research. Moqvist J. (2011) states that the analysis shows that the budget works as a link between decisions taken on the strategic level down to task level. The budget communicates the goals of the business enterprise and thereby, coordinates and controls their activities. And the budget serves the purpose of allocating scarce resources. The budget utilized by the company to assure the running of the organization is budgeted income statement, cash budget and budgeted balance sheet. The budget process is a comprehensive one, involving

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hundreds of employees. It consists of 3 processes: Planning, implementation and monitoring. Ma. Flordeliza Anastacio, PhD, CPA, et.al, 2010 in order for a business entity to thrive in a highly competitive environment, it is essential that a financial manager must be able to plan ahead. Management must be flexible and make adjustments in the company relevant events. Water refilling stations should consider one of the goals of financial management, the social responsibility should be considered because the firm can measure how they can maximize wealth and company market value if it would be able them to draw capital. Mclean (2010)

states that Financial

Planning

is

the

process

of

analyzing the financial opportunities of the organization and selecting Opportunities that will provide financial success. Financial planning can help the organization be good enough to handle their priorities and be competitive enough to their marketing industry. It can make the company survive in their needs. They can plan easily in doing their fund allocation that can maintain the company rate. Patterson (2006) stated that Financial planning formulates the way in which financial goals are to be achieved. A financial plan thus a statement of what is to be done in the future. Most decisions have long leads time which means they take a long time to implement. It formulates the sensible decisions about money that can help the company in achieving their goal. This plan allocates the future finances.

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Paul Peter (2007) drawing the concern to business organization throughout the world and research on the topics generally focuses on two key issues. (1) Understanding the expectations and requirements of the customers and (2) determining how well a company and its major competitors are succeeding in satisfying these expectations requirement. Fund management in water refilling stations is very much important because we can see the flow of money. Role (2010) stated that Management should exercise as much control as possible over the volume, mix and return or cost of both asset and liabilities the financial institution’s goals in a business organizations they need to develop their fund management to maintain the cash flow of the company, and the proper control of their cost and asset to avoid the risk that they might be encountered, for them to determine their organizational goal. Dobbins, (2009) stated that Financial Management means planning, organizing,

directing

and

controlling

the

financial

activities

such

as

procurement and utilization of funds of the enterprise. It means applying general management principles to financial resources of the enterprise.

A

good financial management involves planning, organizing, directing and controlling resources so that the water refilling stations or any other organization can achieve its objectives and fulfill their commitments to beneficiaries, donors and other stakeholders. In planning, it helps the organization look ahead to prepare for the future, such as developing

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budgets to cover activities of the water refilling station. In organizing, it clarifies who does, what, why and how of the organization. In directing, it compares plans with the actual performance to identify the strengths and weaknesses in planning and implementation while in controlling, it make sure that the financial resources of the organization are properly handled and that risks are managed. Financial theory teaches that investment and financing decisions should be based on cash flow and risk. Provides information on payback period; return on capital employed, earnings per share effect, working capital, profit planning, standard costing, and financial statement planning and ratio analysis. Medina (2014) states that Financial planning provides the business operator with a detailed approach to managing the activities of the firm. Decisions can be made in advance, thus maximizing the risk of error brought by making choices in the middle of operations without the benefit of the careful analysis. An organization must know how to plan for their funds. Financial planning can help them to allocate their funds and achieving their goals in the future . in making decisions in company should manage their financial activities in order for them to minimize the risk of error that they may encounter. Financial planning provides the business operator with a detailed approach to managing the activities of the firm. Decisions can be made in advance, thus maximizing the risks of errors brought by making choices in the middle of operations without the benefit of careful analysis. An organization must

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know how to plan for their funds and achieving their goals in the future. In making decisions a company should manage their financial activities in order for them to minimize the risk of errors that may encounter. Rehn (2012) stated that there is significant evidence that by effectively managing each part of working capital, a company can increase the net present value of its cash flows Proper management of asset and capital is part of the business, having it properly planned and performed it will lessen the possible conflict on the operation of the business and its management. It will also lessen the possibility of shortage. According to Smriti Bam (2015) “Financial management focuses on decisions relating to how much and what types of assets to acquire, how to raise the capital needed to purchase assets, how to run the firm so as to maximize its value. Financial management is one of the areas of finance which deals with the management of all financial resources of the organization

for

the

smooth

functioning

of

the

organizational

goal.

Generally, firm are the corporation are the purposes for which the finance functions are carried out. They provide criteria for financial decision making and are essential for right financial decision, financial manger takes goals of a firm as guidelines for financial decisions. Hence, goals of firms are also called as a goal of financial management or financial goal.” Every business you must be able to plan for the future of the organization on a realistic way. Make sure the money is being spent in the most efficient and

effective

way

and

being

spent

to

fulfill

the

objective

of

the

25

organizations.

Financial

management

simply

means

gaining

an

understanding of your financial situation in order to make of your assets in day to day life and in planning for your business and know how to achieve your financial goals. The term financial management has been defined by Solomon (2009), “It is concerned with the efficient use of an important economic resource namely, capital funds”.

At a minimum, a financial management

system should ensure that costs are properly categorized, tracked and charged to the appropriate accounts, and that managers are able to report financial information accurately. Tererai management

Mafukidze decision

(2010) “

making

Organization

takes

place

are

within

dynamic, the

financial

context

of

the

dynamic surrounding the organization and includes the associated financial risk. Financial management is an integral part of management and is made up of a number of distinct processes that happens in a cyclical way. Thus information of a financial nature is constantly being fed by the system

applied.

It is therefore important

the mangers analyze

and

interpret these financial reports generated by the financial management system

to make

informed

decisions for the

organizations. This also

requires efficient and effective from the finance division of the organization. Financial

management

is

the

process

whereby

one

plans

how

one

optimally uses ones income. It is when decisions around expenditure can be justified as supporting the core objectives of the organizations. “

A

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water refilling stations needs to know what will do to have an effective and efficient in their finance so that the business will achieve their aims and

objectives.

The business must have proper financial decisions.

The

business must be strategically in planning their finance in order to utilize well the finances in the business. With the help of financial management, the business can survive in the competitive business world. It must be very careful while making financial decisions. Voss (2002) stated that any operations management involves similar management tasks irrespective of what industry or business one operates. It involves planning, staffing, controlling, directing, motivating and organizing. Irrespective of business, the operations management ranges across the organization as part of strategic and tactical operations (Voss et al., 2002) Significance of the Study This study mainly focused on determining and laying down in a factual manner the financial performance of Wigan Settlers Cooperative of Cordon, Isabela. The result is best significant to the following: Wigan Settlers Cooperative employees. This study determined the financial performance of the cooperative, their strengths and weaknesses for them to improve members, creditors and other people they transact with to ensure that finances were handled appropriately in terms of cash, receivables and collectibles that they have with the cooperative.

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Wigan Settlers Cooperative Members. It gave them a better understanding of the current financial situation of the cooperative thus they are able to know how they shares are being invested and used. Researchers. This study gave the researchers a better understanding on how a cooperative operates and the financial management practices used by a cooperative for it to be financially stable. Future researchers. This study will be a good research material and can be used as baseline data for their own studies if it is related to the subject discussed in this study.

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METHODOLOGY Research Design The researchers used the descriptive survey design. As defined by Calderon (2010), descriptive method describes the data indicative to the Financial Performance of Wigan Settler’s Cooperative members of Wigan, Cordon, Isabela Descriptive method may also be defined as a purposive process of gathering, analyzing and classifying and tabulating data about prevailing conditions, benefits, proves, trends and accurate interpretation about data with or without the aid of statistical method. (Estevez, 2002). Furthermore, descriptive method goes beyond mere gathering and tabulation of data. It involves the elements or interpretation of the meaning or significance of what is described. Thus description is often combining with comparison and contrast involving measurements,

classifications,

interpretations

and

evaluation.

(Cited

by

Gonzalez, 2005) Participants and Research Site This study was conducted in the offices of Wigan Settler’s Cooperative offices located at Wigan, Cordon, Isabela and satellite office at Diadi, Nueva Vizcaya. Instruments or Materials The financial statement of the cooperative was used to gather the needed data in the liquidity, profitability and stability ratios of the cooperative. The

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financial statements of the years 2013 to 2017 will be provided by the accountant of the cooperative and a hard copy together with the notes to the financial statement was given to the researchers. Data Analysis Figures obtained from the hard copy of the financial statement of Wigan Settlers Multipurpose Cooperative was used to compute for the liquidity, stability and profitability ratios that are needed to determine the financial performance of the cooperative which is the main thrust of the study. Ethical Considerations The following ethical guidelines was in place for the study: 1. The dignity and well-being of the members was protected at all times. 2. The researcher obtained the consent of Administration of the cooperative to interview check the financial statement of the cooperative from the year 2013 to 2017.

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RESULTS After getting a commitment letter from the administration of Wigan Settlers Multi-Purpose Cooperative a five year financial statement was given to the researchers to be able to gather needed variables that was used to determine the five year financial performance of the cooperative in terms of its financial liquidity, stability and profitability. Financial Performance of Wigan Settlers Multi-Purpose Cooperative in terms of: 1. Liquidity Ratios Liquidity Ratio provides information about the firm’s ability to pay its current obligations and continue operations. Table 1. Liquidity Ratios of Wigan Settlers Multi-Purpose Cooperative

Current Assets Current Liabilities Current Assets Total Assets Quick Assets Current Liabilities

2017 1.86 times

2016 2.54 times

2015 2.59 times

2014 2.45 times

2013 2.08 times

83%

94%

98%

98%

97%

1.86:1

2.48:1

2.59:1

2.42:1

2.08:1

As shown in the table in relation to the current ratio of Wigan Settlers Multi-Purpose Cooperative it shows a continuous increase in the ratio from 2013 to 2015 with a slight decrease in 2016 and 2017. The table also shows the ratio of current assets in relation to the total assets were from the period of 2013 to 2017 the ratios are 97%, 988%, 98%, and 94% respectively showing an almost perfect liquidity of the current assets in

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relation to the total assets. It is only during 2017 that the liquidity saw a decrease to 83%. The table also shows how the cooperative is able to pay its short term debts from its most liquid assets with the years 2013 to 2017 showing a very good ratio where there are almost 2 times more assets to pay for their liabilities while in the year 2017 there is a slight decrease to 1.86 but still they are able to pay their short term debts thru their most liquid assets. 2. Profitability Ratios Profitability Ratio measures earnings in relation to some base, such as assets, sales, or capital. It is the ability to generate adequate profits to sustain the operations of the changes in the individual items in the financial statement. Table 2. Profitability Ratio of Wigan Settlers Multi-Purpose Cooperative Profitability Ratio Net Surplus Average Equity *Average Equity = Beginning Equity+ Ending Equity/2 Gross Profit Net Sales Net Surplus Total Revenue

2017 2016 2015 2014 2013 40% 30% 43% 42% 37%

10%

9%

25%

23%

32%

8%

9%

50%

65%

The table shows an average of 38% on the rate of return on the capital of the cooperative with the years 2014, 2015, and 2017 showing the strongest ratio of 42%, 43% and 40% return on equity ratio respectively, the years 2016 and 2013 shows the weakest ratio of return on equity of 30% and 37% respectively.

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The table also shows the gross profit ratio of the cooperative where the desired profit is shown with enough revenue to be able to cover the operating expenses needed by the establishment a percentage ratio of 8% to 10% is being shown which keeps to the profitability of the cooperative and being able to cover the operating expenses needed to pay for different expenses incurred in the operation of the cooperative still leaving enough profit for the shareholders of the company. The table also shows net profit margin of the cooperative in comparison with the total sales of the company with 2013 and 2014 being the strongest with a profit margin of 65% and 50% respectively. In the years 2015 to 2017 there is a noticeable decrease in the net profit margin with a 32%, 23%, and 25% net profit margin computed respectively.

3. Stability Ratio Stability Ratio or analysis investigates how much debt can be supported by the company and whether debt and equity are balanced. Table 3. Stability Ratio of Wigan Settlers Multi-Purpose Cooperative Stability Ratio Total Liabilities Equity Equity Total Liabilities Equity Total Assets Total Liabilities Total Assets Cost of Sales + Operating Expenses Net Sales

2017 90%

2016 71%

2015 69%

2014 75%

2013 89%

1.10:1

1.40:1

1.44:1

1.34:1

1.12:1

53%

58%

58%

57%

53%

48%

42%

41%

43%

47%

1.13:1

1.15:1

1.14:1

1.07:1

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The table shows the ratio of debt in relation to the equity the ratio varies from year to year with the year 2017 having 90% or the lowest and the year 2015 69% or the highest. The ratio shows that resources provided by creditors of the company are enough to cover for the shareholders equity. The table also shows the equity to debt ratio wherein it measures the margin of safety for the creditors with the years 2014, 2015, and 2016 showing a strong ratio of 1.31, 1.44 and 1.40 respectively. The years 2013 and 2017 shows a ratio of 1.121 and 1.10 respectively. The table means that although there are fluctuations in the equity to debt ratio the cooperative still has a high margin of safety to its creditors. The table also shows the owner’s equity to total assets with a percentage showing that majority of the total assets of the cooperative are provided by its members/shareholders, indicating that the members/shareholders of the cooperative are in effect willing to risk their shares because they are confident of the stability of the establishment. The table also shows what is percentage of the total assets of the company are provided by its creditors, showing an average of 44.2% on the operating years of 2013 – 2017, which indicates that creditors are steadily providing the cooperative with their steady share in the computed total assets of the establishment. The table also shows the operating ratio of the cooperative where it indicates how much of the operating expenses is being covered by the net sales. The year 2013 shows the strongest with a ratio of 1.07:1, the years 2014, 2016,

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and 2017 shows a fluctuation in the ratio with 1.14:1, 1.15:1 and 1.13:1 respectively.

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DISCUSSION

Summary of Findings This section discussed what the financial performance of Wigan Settler’s Multipurpose Cooperative of Wigan, Cordon, Isabela by computing different ratios of Liquidity, Stability, and Profitability by using the Annual Financial Statement presented by the Cooperatives Accountants to its shareholder as the baseline data used for the computations. As it was found the financial performance of Wigan Settler’s Multipurpose Cooperative is excellent basing from the different ratios computed in its liquidity, stability and profitability.

Discussion of the Findings Liquidity As to the liquidity ratio of the cooperative the short term solvency of the cooperative is at a level where it shows that the current assets are able to cover for the current liabilities being incurred by the company. The cooperative shows a decrease in its liquidity only during the year 2017. But they are still able to pay their short term debts by the use of its most liquid assets wherein the ratio of their liquid assets are almost doubled to compensate for their liabilities. Profitability The cooperative shows a profitability ratio that maintains a revenue after deducting the operating expenses incurred by the establishments, profit is also increased on the shareholders although it is not high enough it is still on the level

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that the members and administrators of the cooperative are able to show profit margins that satisfies the needs of the company. Stability Stability of the cooperative means that although there are fluctuations in the equity to debt ratio the cooperative still has a high margin of safety to its creditors.

Stability also indicates that the members/shareholders of the

cooperative are in effect willing to risk their shares because they are confident of the stability of the establishment. It also indicates that creditors are steadily providing the cooperative with their steady share in the computed total assets of the establishment.

Implications for Practice Knowing how a cooperative works especially in its financial aspect is important to the researchers especially to financial management students who needs to understand how a simple cooperative with its shareholder are able to produce a revenue from such small capital that they have started with and able to convert it into a multimillion peso business both benefiting the company and its shareholders.

Recommendation for Further Research Basing from the baseline data gathered from this study it could be more beneficial to future researchers to determine specific areas of the financial performance of a cooperative by giving more focus on how the cooperative is

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able to liquidate such huge assets by not overspending on it and instead able to make this liquid assets as their main ingredient in making bigger revenues for the cooperative. It is also suggested that more in depth analysis be given to what are the privileges that cooperatives have over private enterprises owned thru single proprietorship when it comes to tax incentives and other subsidiary benefits given the government of the Philippines.

Conclusions Here are some of the conclusions as seen from the financial performance of Wigan Settlers Multi-Purpose Cooperative to continue its existence as one of the top performing cooperative in the area: 1. The cooperative must improve its efficiency and effectiveness in utilizing its assets. The administration must find ways to maximize the use of its assets so that they will be able to maximize the income generating capability of the cooperative. 2. The administrators of the cooperative must continue orienting its shareholders on the financial performance of the establishment to establish trust and in turn generate more shareholder equity thereby increasing the assets they can use for a better financial performance for the cooperative.

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