Cornhusker Economics

Cornhusker Economics

Using Unallocated Retained Earnings to Finance Agricultural Cooperatives

Historically, U.S. agricultural cooperatives have relied primarily on retained patronage refunds for accumulating equity capital. Typically, a cooperative returns its net earnings to members as a combination of cash and noncash patronage refund allocations. Members maintain ownership of the noncash allocations, which provide equity until the cooperative eventually redeems them in cash when they are replaced by future allocations.

Over time, however, retained earnings have become an increasingly important source of equity capital for cooperatives. Retained earnings consist of net income that a cooperative does not allocate or distribute to members. The equity obtained from retained earnings is not allocated to individual members, and generally there is no expectation that it will be distributed to members except upon dissolution of the cooperative.

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2017 Cornhusker Economics

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