2.3 Measurement of Variables
As a first measure, the stewards must reasonably earn from its operation. The cooperative’s operation can be represented by the proxy variable total receivables since cooperatives would procure inventory and sell it on credit if they are in merchandising or grant loans if they are in credit line of business. Consequently, total receivables represent the fully rendered service of the cooperative to its members or non-member customers. The cooperative earnings from their operation can be represented by the variable gross income because it represents the amount generated by the cooperative from its business operation (i.e selling inventories or service on credit or issuing loans, which are represented by total receivables) and after deduction of cost of services (i.e cost of goods sold for merchandising, cost of services, etc.).
As a second measure, the stewards must be able to generate profit to improve the economic well-being and quality of life the members through greater dividend payments and patronage refunds. The net surplus/income can be used as a variable to represent that income that the cooperative have earned from itself (Chen, 1975) as a result of utilizing the assets of the cooperative. The net surplus/income generated represents the efficiency of the management to use available resources and their effectiveness in attaining their desired profitability.
As a third measure, the stewards must sustain growth of the cooperative. The growth in total assets indicates that the management was able to procure and generate greater resources to be utilized in generating profit to compensate the contributed capital of the members. The increase in total asset also means that the cooperative can cater greater services to the members, stakeholders, and the community.
As a fourth measure, the members support to their stewards can be indicated by their economic participation (Harun & Mahmood, 2012). Generally, the members would support and approve the management’s activity through their paid-up shares. The members are interested in paying their subscribed share and the number of members is increasing when they can observe that the cooperative members’ lives are improving (Sexton, 2001) and the shared goals of the cooperative is being met.
Lastly, the stewards must strive to make profit for the shareholders (Chen, 1975) and maximized the value of the shareholders. The retained earnings represent the net increment on the shareholder’s equity as a result of operation and after deducting dividends (i.e interest on share capital and patronage refund). Greater retained means greater accrued value for the shareholders.