The document discusses key aspects of financial management for cooperatives including: 1. Estimating capital requirements and determining an optimal capital structure with the proper balance of debt and equity. 2. Managing cash flows and utilizing funds efficiently for expenditures while maintaining sufficient liquidity. 3. Setting financial goals and objectives around profitability, returns, and sustaining cooperative activities for members.

1. Operation & Managemen
of the Cooperative

2. Importance of
Financial
Management,
Human Resource
(Personnel
Management),
Marketing, Production
or Technical aspects
Allocation and
distribution of net
surplus
Overview of
Ethical
Standards in
Cooperatives
Performance and Measurement
(balance scorecard)
1
2
3
4

3. Management
Financial
It 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

4. • Involves setting financial goals and analyzing data to
accomplish the objectives of the organization.
• It is the strategic planning of how a business should earn
and spend money (10-15% of your Ave total Assets)
• It includes decisions about raising capital, borrowing
money and budgeting.
Financial Management

5. 2. Determination of capital
composition: Once the
estimation have been made,
the capital structure have to
be decided. This involves
short- term and long- term
debt equity analysis. This will
depend upon the proportion of
equity capital a cooperative is
possessing and additional
funds which have to be raised
from outside parties.
(100 – 150 % liquidity)
Functions of Financial
Management
1. Estimation of capital
requirements: A finance manager
has to make estimation with
regards to capital requirements
of the cooperative. This will
depend upon expected costs and
profits and future program and
policies of a concern. Estimations
have to be made in an adequate
manner which increases earning
capacity of enterprise.

6. Objectives of Financial Management
• To develop a dynamic savings mobilization and capital build-up schemes to sustain its developmental
activities and long-term investments, thereby ensuring optimum economic benefits to the members,
their families and the communities .
• To ensure regular and adequate supply of funds to the concern.
• To ensure adequate returns to the members which will depend upon the earning capacity of the
cooperative.
• To ensure optimum funds utilization. Once the funds are procured, they should be utilized in maximum
possible way at least cost.
• To ensure safety on investment, i.e, funds
should be invested in safe ventures so
that adequate rate of return can be achieved.
• To plan a sound capital structure-There should be sound and fair composition of capital so that a
balance is maintained between debt and equity capital.

7. 1. Investment decisions includes investment in fixed assets (called
as capital budgeting). Investment in current assets are also a part
of investment decisions called as working capital decisions.
2. Financial decisions - They relate to the raising of finance from
various resources which will depend upon decision on type of
source, period of financing, cost of financing and the returns
thereby. There should be sound and fair composition of capital so
that a balance is maintained between debt and equity capital.
3. Dividend decision - The finance manager has to take decision
with regards to the net profit distribution. Net profits are generally
divided into two:
a) Interest on Share Capital-
b) Patronage Refund-
Scope/Elements

8. 3. Choice of sources of funds: For additional
funds to be procured, a cooperative has many
choices like:
• Issue of shares
• Loans to be taken from banks and financial
institutions
4. Investment of funds: The manager
has to decide to allocate funds into
profitable ventures so that there is safety
on investment and regular returns is
possible. Funds should be invested in
secured ventures so that adequate rate of
return can be achieved.
Leverage: is an investment strategy of
using borrowed money—specifically, the
use of various financial instruments or
borrowed capital—to increase the
potential return of an investment.

9. 5. Management of cash: The Manager has to make decisions with regards to cash
management. Cash is required for many purposes like payment of wages and salaries, payment
of electricity and water bills, payment to creditors, meeting current liabilities, maintenance of
enough stock, purchase of raw materials, etc. Utilized in maximum possible way at the very least
cost.
6. Financial controls: The manager
has not only to plan, procure and
utilize the funds but he also has to
exercise control over finances. This
can be done through many techniques
like ratio analysis, financial
forecasting, cost and profit control,
etc. Manage your finances so you
don’t overspend and remain
prepared for all expenditures, as well
as profit distributions.

10. Capital
Budgeting
Working Capital
Management
Cost of Capital
Capital Structure
Decisions
Leverages
ISC Policy
Retained Earnings

11. Objectives of Financial
Management
1. Basic Objectives
 Profit Maximization
 Wealth
Maximization
2. Operational
Objectives
 To ensure regular,
adequate and timely
supply of requisite
finances
 Most effective
Utilization of finances
 Safety of investments
 Growth of the
enterprise
3. Social Objectives
 adequate returns
Timely payment of
interest
 Payment of
reasonable interest
of share capital
 Timely payment of
wages
 Fast settlement
with suppliers
 Maintaining
relations with
financiers
4. Research Objectives
 Researching into
new and better
sources of finances
 To develop a
dynamic savings
mobilization and
capital build-up
schemes to sustain
its developmental
activities and long-
term investments,

12. Section 1. Source of Funds. The Cooperative may
derive its funds from any or all of the following
sources:
a. Member’s share capital contribution;
b. Loans and borrowings including deposits;
c. Revolving capital build-up which consist of the
deferred payment of patronage refund or
interest on share capital;
d. Subsidies, grants, legacies, aids, donation,
awards and winnings and such other
assistance from any local or foreign institution,
public or private;
e. Retentions from the proceeds of services
acquired /goods procured by members; and c.
Other sources of funds as may be authorized
by law.
By Laws: Article VII Capital Structure Section

13. By Laws. Article VII Capital Structure
Section 2. Continuous Capital Build-Up. Every
member shall have invested in any or all of the
following:
a. At least _____________Pesos (P_________)
per month;
b. At least _____ percent (__%) of his/her annual
interest on capital and patronage refund; and
c. At least _________ percent (__%) of each good
procured /service acquired from the
cooperative.

14. • Capital Expenditures
• Procurement of goods for sale
• Operating Expenses
• Distribution of Interest on Share Capital
and Patronage Refund
• Community Outreach
• Withdrawal of share capital
• Payment of borrowings
• Remittances to government agencies-
SSS, Phihealth, Pag-ibig and BIR
• Buy back its own stock – treasury
stocks
• Other uses
Uses of Funds

15. • As the word suggests is the optimum utilization
of cash to ensure maximum liquidity and
maximum profitability. It refers to the proper
collection, disbursement, and investment of cash.
For a small cooperative, proper utilization
of cash ensures solvency.
• Cash is the lifeblood of a business and a business
needs to generate enough cash from its activities
so that it can meet its expenses and have enough
left over to repay investors and grow the
cooperative. While a cooperative can fake its
earnings, its cash flow provides an idea about its
real health.

16. • Capital structure balance is normally upheld by establishing a
tailored equilibrium between debt and equity. Both of these funding
methods come hand-in-hand with their own unique sets of
advantages and disadvantages, which is why the vast majority of
treasurers devote a lot of their time and energy towards utilizing a
combination of the two to ensure their respective organizations are
effectively funded to meet any unique long-term objectives.
Unfortunately, there’s no magical formula am organization can
achieve to establish supreme financial harmony. There are
rough guidelines surrounding a firm’s ideal debt-to-equity ratio,
sure – but at the end of the day, each firm must carefully weigh
the pros and cons of debt and equity in order to strike the
perfect balance that works for their business.
Debt and Equity is a leverage ratio that calculates
the weight of total debt and financial liabilities against
total members equity, or, shows how much of a
cooperative is owned by creditors compared with how
much members equity is held by the cooperative.

17. Reference:
• cda-ReD-fr-029-performance-audit-report-rev.1-final_updated.xlsx
(live.com)