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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


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.

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


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


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

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

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


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

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

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 ( 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

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

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’


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


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


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


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


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. It is an

approach to management that relates financial techniques, tools and

methodologies to strategic decisions making or have a long term futuristic

perspective of financial wellbeing of the firm to facilitate growth,

sustenance and competitive edge consistently. Strategic Financial

Management also deals with investment decisions, financing decisions,

liquidity decisions, dividend decisions, and profitability decisions. A water


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


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

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 best value for money. It is basically applying general

management concepts to the cash of the company. A financial

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


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


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


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


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.

Increase in liquidity and time period to supplier will also lead firms’ overall


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 management involves utilizing

resources from staff, materials, equipment and technology. Operations

managers acquire, develop and deliver goods to clients based 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 multi-

business companies that would be aimed at meeting the strategic goals of the


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


Konak and Guner (2016) states that it is important to be

aware of the impacts of management of working capital indicators on

firm performances. In a business, Konak and Guner emphasize the

important role of the working capital in the operation of the

business and its financial management.

Working capital management involves the management of the

firm when includes cash and cash 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


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


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


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


hundreds of employees. It consists of 3 processes: Planning, implementation and


Ma. Flordeliza Anastacio, PhD, CPA,, 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.


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


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


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


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


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

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 Mafukidze (2010) “ Organization are dynamic, financial

management decision making takes place within the 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


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.


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.



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


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

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.


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

2017 2016 2015 2014 2013

Current Assets 1.86 times 2.54 times 2.59 times 2.45 times 2.08 times
Current Liabilities
Current Assets 83% 94% 98% 98% 97%
Total Assets
Quick Assets 1.86:1 2.48:1 2.59:1 2.42:1 2.08:1
Current Liabilities

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


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


Table 2. Profitability Ratio of Wigan Settlers Multi-Purpose Cooperative

Profitability Ratio 2017 2016 2015 2014 2013

Net Surplus 40% 30% 43% 42% 37%
Average Equity

*Average Equity = Beginning Equity+ Ending

Gross Profit 10% 9% 8% 9%
Net Sales
Net Surplus 25% 23% 32% 50% 65%
Total Revenue

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.

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


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 2017 2016 2015 2014 2013

Total Liabilities 90% 71% 69% 75% 89%
Equity 1.10:1 1.40:1 1.44:1 1.34:1 1.12:1
Total Liabilities
Equity 53% 58% 58% 57% 53%
Total Assets
Total Liabilities 48% 42% 41% 43% 47%
Total Assets
Cost of Sales + Operating Expenses 1.13:1 1.15:1 1.14:1 1.07:1
Net Sales

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,

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



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


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.


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

that the members and administrators of the cooperative are able to show profit

margins that satisfies the needs of the company.


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


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


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


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.


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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