Finance and Accounting Flashcards
Financing sources for private sector enterprises
- personal funds
- angel investors
- banks (loans)
- venture capital
- stock exchange
Acts governing investment in co-ops in Manitoba
- co-op act
- securities act
the Co-op Act
permits selling of shares or investment by way of a loan in a co-operative to members
- limited exception to sell shares to non members
The securities act
rules and safeguards for equity investment by requiring issuers to file offering statement/prospectus
Financing principles
- members must assume the responsibility of financing the co-operative
- financial plans must be consistent with co-op principles
- members in co-ops contribute to capital
Are most of the funds in a co-op raised from membership shares?
yes
Equity in a co-op
in addition to membership shares, equity in co-ops can be raised with:
- Member loans (since members are owners loans can be considered as equity in some circumstances
- Preferred shares (non voting shares, have set dividend rate)
CED
Community enterprise development tax credit
What is the CED
a program that encourages Manitobans to invest in enterprises in their communities by providing a tax incentive, while providing community-based enterprises with access to equity capital
Supportive investment funds (4)
- co-operative business capital fund
- social enterprise fund
- a green investment fund
- a local community fund
Co-op debt:
- loans (short and long term)
- bonds
- not that different from private sector enterprises except for personal guarantees
Can co-ops borrow funds at better rates than individuals?
yes
Equity distribution to co-op members (2 ways)
1) portion of net profits retained by co-op (for expansion or reserve fund)
2) remainder of net profits are distributed to members as allocated equity
Allocated equity also known as:
patronage dividends
Profits from non-member business known as:
unallocated equity
Who decides the amount of the patronage dividends
the Board members
Worker co-op patronage dividends based on:
hours worked or annual pay
credit union patronage dividends based on:
amount of interest paid or earned
producer/marketing co-op dividends paid based on:
$ or volume
Housing co-op dividends paid based on:
no patronage dividends
Which type of co-op is it harder to divide and allocate patronage dividends?
multi-stakeholder co-ops
Why are multi-stakeholders hard to divide patronage dividends?
Because the workers, consumers, and producers all have their own interests
Profit distribution in Mondragon Co-ops
education fund- 10%
reserve fund - 45%
workers/members - 45%
GAAP
Generally Accepted Accounting Principles focus on publicly listed investor owned companies
- specific accounting standards for non-profits, charities, and the public sector
