Abstract:
Financial performance analysis of a firm is made from its audited financial reports, balance
sheets and income statements, to measure its liquidity, solvency, asset management efficiency and profitability position in maximizing the wealth of owners. In line with this, the main purpose of the paper is: the Study of Financial Performances of Ambo Farmers’ Cooperative Union. Cooperative Union, Ambo Farmers’ Cooperative Union. For attaining this objective, secondary data were drawn from audited financial statements of the union for 2016-2021 G.C. and analyzed through ratios and trend analytical techniques. The result of the study revealed current ratio, quick ratio and networking capital were above the standard denoting that the liquidity position of the union is satisfactory. However, the debt and equity ratio (all periods) and the debt to asset ratio (in some study periods) were greater than the standard and the proprietors’ ratio (over all study periods) was below the standards showing that the union’s long term solvency was very poor. It was also revealed that the inventory turnover ratio and the total asset turnover ratio of the union indicated that the union was efficiently managing its inventory and its total assets in increasing its return respectively. But, the debtors’ turnover ratio of the union was below the standard. Besides, the gross profit margin ratio, operating profit margin ratio and net profit margin ratio of the union revealed that the profitability of the union was not at its satisfactory level. Therefore, to improve the debtors’ turnover ratio of the union, there should be effective collection and credit policy and collection effort. In addition, to improve the solvency position of the union, the management of the union should increase its internal own funds by increasing cooperative members and thereby issuing additional shares, and increase reserve funds by engaging in profitable businesses. To upsurge profitability position of the union, The management bodies should decrease manufacturing and purchasing costs and other operating and
non-operating expenses, design effective product pricing policies and undertake profitable business ventures.
