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Author: 
 
 Bexell, John Andrew 
 
 Title: 
 
 A survey of typical 
 cooperative stores in 
 
 Place: 
 
 Washington, D.C. 
 
 Date: 
 
 1916 
 
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 Bexell, John Andrew. 
 
 ... A survey of typical cooperative stores in the United 
 States. By J. A. Bexell ... Hector Macpherson ... and 
 W. H. Kerr ... Washington, Govt, print, off., 1916. 
 
 cover-title, 32 p. incl. tables, ii pi. on 1 1. 23'". (U. S. Dept. of 
 agriculture. Bulletin no. 394) 
 
 Contribution from the Office of markets and rural organization. 
 
 JL Cooperation, il. Cooperative storesi i. Macpherson, Hector, joint 
 iifTnor. II. Kerr, William Horace, joint author. 
 
 Library, U. S. Dept. of 
 
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 UNITED STATES DEPARTMENT OF AtfRICULTURE 
 
 BULLETIN No. 394 
 
 Contribution from Office of Markets and Rural Organization 
 CHARLES J. BRAND, Cliief 
 
 Washington, D. C. 
 
 November 3, 1916 
 
 A SURVEY OF 
 
 TYPICAL COOPERATIVE STORES 
 
 IN THE UNITED STATES 
 
 By 
 
 J. A. BEXELL, Dean, School of Commerce, Oregon Agricultural College; 
 HECTOR MACPHERSON, Director, Bureau of Markets, Ore- 
 gon Agricultural College; and W. H. KERR, Investigator 
 in Market Business Practice, Office of Markets 
 and Rural Organization, United States 
 Department of Agriculture 
 
 CONTENTS 
 
 Pago 
 Purpose, Scope, and Metliod of tlie 
 
 Surrey 1 
 
 Origin of tlie Stores S 
 
 General Organization 6 
 
 Operating Organisation 8 
 
 Finance 9 
 
 Credit 12 
 
 Poreliasinf 13 
 
 Selling 
 
 Accounting, Reports, and Auditing 
 
 Equipment 
 
 The Balance Sheet 
 
 Operating Expenses .... 
 Observations and Conclusions . 
 Appendix 
 
 Page 
 14 
 IS 
 20 
 20 
 21 
 
 , 26 
 SO 
 
 WASHINGTON 
 
 GOVERNMENT PRINTING OFFICE 
 
 1916 
 
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 UNITED STATES DEPARTMENT OF AGRICULTURE 
 
 BULLETIN No. 394 
 
 Contribution from Office of Markets and Rural Organization 
 ^Vl^ CHARLES J. BRAND. Chief 
 
 Washington, D. C. 
 
 November 3, 1916 
 
 u 
 
 h^ 
 
 A SURVEY OF TYPICAL COOPERATIVE STORES IN 
 
 THE UNITED STATES. 
 
 By J. A. Bexell, Dean, School of Commerce, Oregon Agricultural College; 
 Hectob Macphebson, Director, Bureau of Markets, Oregon Agricultural Col- 
 lege; and W. H. Kebk, Investigator in Market Business Practice, Office of 
 Markets and Rural Organisation, United States Department of Agriculture. 
 
 CONTENTS. 
 
 Page. 
 
 Purpose, scope, and method of the survey ... 1 
 
 Origin of the stores 3 
 
 General organization 6 
 
 Operating organization 8 
 
 Finance 9 
 
 Credit 12 
 
 Purchasing 13 
 
 Page. 
 
 Sellfaig 14 
 
 Accounting, reports, and auditing 16 
 
 Equipment 20 
 
 The balance sheet 20 
 
 Operating expenses 21 
 
 Observations and conclusions 26 
 
 Appendix 30 
 
 
 THE PURPOSE, SCOPE, AND METHOD OF THE SURVEY. 
 
 The financial success of the Rochdale Cooperative Store in Great 
 Britain, as well as in several other European countries, notably 
 Denmark and Switzerland, has aroused a widespread interest in that 
 type of cooperation in the United States. This interest has resulted 
 in the establishment of stores in all parts of the country, until it is 
 estimated that there are now approximately 400 in the United States, 
 distributed mainly in the North Central States and on the Pacific 
 
 coast. 
 
 The movement has probably been stimulated by investigations 
 carried on by the governments of various cities and States which 
 have emphasized the cost of distribution as the chief factor in the 
 high cost of living. The Department of Agriculture, as well as the 
 various universities, agricultural colleges, and departments of state 
 have received appeals for information regarding the feasibility of 
 the cooperative store as a remedy for the great expense of distribution 
 and the resulting high cost of living. 
 
 With a view to obtaining some definite information on this subject, 
 the Office of Markets and Rural Organization, in cooperation with 
 the School of Commerce of the Oregon Agricultural College, during 
 
 NoTB. — This bulletin should be of interest to cooperative stores and to producers and 
 consumers generally. - ,- » 
 
 47«14"— Bull. 394— 1« 1 -<*Lr5 ^"^ S . 
 
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BULLETIN 304, IT. S. DEPARTMENT OF AGRICULTURE. 
 
 A SURVEY OF TYPICAL COOPERATIVE STORES. 
 
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 the summer of 1015, imdertook to make a survey of a number of typi- 
 cal cooperative stores. The sole purpose of the survey was that some 
 disinterested agency might be informed as accurately as possible 
 regarding the subject of cooperative stores, and that some measure 
 of guidance might be extended to stores wliich are now operating and 
 t6 those which may be formed in the future. 
 
 No attempt was made to visit or question all the cooperative 
 stores in any State visited. The investigation was confined to a 
 number of representative stores which were chosen after a study 
 of all available information. Care was taken to include as nearly 
 as possible representatives of all existing types. Among them are 
 found some of the most successful concerns, as well as others which, 
 at the time of the survey, had already gone into the hands of re- 
 ceivers. A study of the tables makes clear the great range of stores 
 investigated. The stores selected were in 10 different States: Miclii- 
 gan, Illinois, Wisconsin, Minnesota, North Dakota, Iowa, Kansas, 
 California, Oregon, and Washington. 
 
 A list of questions, arranged in groups, was drawn up as shown 
 on page 3. The investigator made a personal visit to each store, 
 went over the entire list of questions with the manager, and supple- 
 mented the questionnaire by notes on points which could not be 
 covered in this categorical form. 
 
 The present bulletin covers the material collected from 60 stores, 
 but almost half of these were unable to supply sufficiently accurate 
 data to be included in Table X. For the most part, the tables are 
 allowed to speak for themselves. The supplementary reading matter 
 is intended merely to bring out facts wliich either can not be included 
 in the tables or which might escape the attention of the student if 
 specific reference were not made to them. In the questionnaire (p. 3) 
 the figures represent averages for the stores answering the (]uestion. 
 which number is indicated in parentheses. The results may be studied 
 to better advantage by reference to the different tables. 
 
 At the outset it must be made clear that neither the tables nor 
 the observations make any pretense of finality. At the same time, 
 it is believed that they are sufficiently reliable to offer timely sug- 
 gestions to all who are interested in the cooperative-store movement. 
 The investigator used as much precaution to obtain accurate data as 
 the limitations of tha survey would permit. Nearly all of the results 
 are based on certified reports. In a few instances careful estimates 
 were accepted: but these, it is believed, in no case materially affect 
 
 Noxa.— For further discussion of cooperative purchasing of farm supplles^see Carver, 
 T. N. : The Organization of a Rural rommuuity, Department of Agriculture Yearbook, 1014 
 (separate 632), and Baasett, C. E. : The Cooperative Purchase of Farm Supplies. Depart- 
 ment of Agriculture Yearbooli, 1915 (separate 658). 
 
 the results. Where such estimates appear doubtful they have been 
 eliminated. This accounts in part for the varying number of asso- 
 ciations answering the different questions. 
 
 For obvious reasons care has been taken to conceal both the identity 
 and locality of the stores investigated. The numbers in Table 10 bear 
 no relation to the order in which the stores were visited nor to the 
 numbers on the questionnaires. Stores which had been recently estab- 
 lished and which had as yet little or no experience of value were 
 usuall}^ omitted. Almost without exception the investigator found 
 the store managers willing to cooperate in attaining the object of the 
 survey and glad to furnish all the information in their possession. 
 
 ORIGIN OF THE STORES. 
 
 Inquiry into the origin of the stores investigated revealed a variety 
 of causes. In some cases the stores were started as a protest against 
 real or fancied abuses. In others the association was organized on 
 the initiative of outside promoters who make a business of organizing 
 cooperative stores. In still other cases there is reason to believe the 
 stores were established on the initiative of individuals who expected 
 to obtain permanent employment in the store. 
 
 As will be noticed by the answers to questions 6 and 7, there were 
 20 cases in which an established business was purchased. A gi-eat 
 deal has been said in favor of this practice. It has certain advan- 
 tages, to be sure, but from the cases examined in the present survey 
 the advantages of the established business appear to have been offset 
 by serious disadvantages. In some instances failing concerns suc- 
 ceeded in unloading stocks of goods upon the cooperative association 
 at excessively high prices and with liberal allowances for good will 
 thrown in. In other cases the association found itself with a large 
 proportion of the purchased stock either shelf worn or poorly adapted 
 to the needs of the community. 
 
 QUESTIONNAIBE ON THE BUSINESS PBACTICE OF CoOPERATm: STORES.* 
 
 Report No. 
 
 Date , 1915. 
 
 Information obtained by Information given by 
 
 I. Oeiieral: 
 
 1. Name: ; 2. City: ; 3. Street and No. ; 4. County: ; 
 
 5. State: ; 6. Was new business started: (20) Yes; 7. Estab- 
 lished business purchased; (20) Yes; 8. Principal line: ; 
 
 9. Secondary lines: ; 10. Principal industry in locality: (31) 
 
 Farming; 11. Is location desirable: (37) Good; 12. Present mana- 
 ger: ; 13. His experience: 
 
 1 Numbers in parentheses are stores reporting. In most cases the difference between 
 the number given and 60, the total number surveyed, were either answered in the oppo- 
 site or not at all. Where not qualified figures represent averages. 
 
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 BULLETIN 394, U. S. DEPARTMENT OP AGRICTJLTURE. 
 
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 II. External or corporate organization: 
 
 14. Organized under cooperative law: (32) Yes; 15. Corporation law: 
 (10) Yes; 16. Number of members (43) 228; 17. Condition of mem- 
 bership: ; Vote: (40) One per member; 19. Principal nationality 
 
 of members (49) American born; 20. President: (46) Yes; 21. Vice 
 president: (35) Yes; 22. Secretary: (38) Yes; 23. Treasurer: (34) 
 
 Yes; 24. Auditors (24) Yes; 25. Other officers: ; 26. Directors: 
 
 (43) 5 ; 27. Term of office : (34) One year ; 28. Committees and duties : 
 
 ; 29. Branches: (5) Yes; 30. Controlled by grange: (2) Yes; 31. 
 
 Controlled by farmers' union: (1) Yes. 
 
 III. Internal or operating organisation: 
 
 32. General manager: (47) Yes; 33. Sales manager: (7) Yes; 34. 
 Buyer: (4) Yes; 35. Cashier: (10) Yes; 36. Bookkeepers: (31) Yes; 
 37. Salesmen: (44) 5; 38. Saleswomen: (28) 3; 39. Stenographers: 
 (3) Yes; 40. Departments: (49) 2; 41. Is responsibilitv definite: 
 (27) No. 
 
 IV. Finance: 
 
 42. Capital authorized: (32) .$45,437; 43. Subscribed: (41) $20,143; 
 44. Paid in: (50) $16,627; 45. Par value of shares: (44) $53; 46.' 
 
 How transferable: ; 47. Amount may be held by member: (31) 
 
 High $8,000. low $10, average $1,200; 48. Interest paid on stock: (37) 
 Yes; 49. Paid annually: (34) -Yes; 50. Semiannually: (40) No; 5L 
 Dividends to members: (35) Yes; 52. Dividends to nonmembers: 
 (18) Yes; 53. Dividends paid annually: (30)' Yes; 54. Semiannually: 
 (39) No; 55. Dividends paid in cash: (27) Yes; 56. Dividends in mer- 
 chandise: (29) No; 57, Dividends In stock: (35) No. 
 V. Credit: 
 
 58. Do you borrow money: (40) Yes; 59. Rate of Interest: (37) 7 per 
 cent; 60. Are bills discounted regularly: (18) Yes; 6L Estimated 
 saving: (24) .$997; 62. Is credit difficult to obtain: (33) No; 63. 
 Security offered: (26) None; 64. Credit extended to customers: (45) 
 Yes; 65. For how long: (27) Two months; 66. Losses due to credit: 
 (15) $664; 67. Are accounts paid promptly: (25) Yes; 68. Advan- 
 tages of credit: ; 69. Disadvantages: (For per cent credit 
 
 sales, see question 80.) 
 VI. Purchasing: 
 
 70. Principal market: ; 71. From salesmen: (43) Yes; 72. From 
 
 catalogue houses: (21) No; 73. From manufacturers: (24) Yes; 
 74. Are lowest prices obtained: (27) Yes; 75. Estimated produce 
 bough* from farmers: (22) $12,126; 76. Are all orders reduced to 
 WTiting: (30) No; 77. Invoices checked systematically: (39) Yes- 
 
 78. Difficulties: 
 
 VII. Selling: 
 
 79. Per cent country trade: (43) 63; 80. Per cent town trade: (43) 
 37; 81. Per cent membership trade (42) 60; 82. Nonmembership 
 trade: (42) 40; 83. Per cent active members (37) 80; 84. Nonac- 
 tive: (37) 20: 85. Per cent cash sales: (.36) 50; 86. Per cent credit 
 sales: (36) 50; 87. Advertising methods: (23) None; 88. Delivery 
 system: (32) Yes; 89. Total annual sales by departments: (45) 
 $87,781; 90. Rnte of profit on sales by departments: (36) 20 per 
 cent;* 91. Store opens: (37) 7 a. m. ; 92. Closes: (37) 7 p m • 
 Saturdays 9 to 10. 
 
 A SURVEY OF TYPICAL COOPERATIVE STORES. 5 
 
 VIII. Accounting and business methods: 
 
 93. When was system adopted : ; 94. Satisfactory : (20) Yes ; 95. 
 
 Defects: ; 96. Double entry: (36) Yes; 97. How often is trial 
 
 balance taken: (36) Monthly; 98. Is total cash deposited daily: 
 (28) No; 99. Sales slips used: (42) Yes; 100. Are trading coupons 
 used: (27) No; lOL Is duplicating billing ledger used: (32) No; 102. 
 Are cost accounts kept by departments: (34) No; 103. System of 
 
 filing sales slips : __. 
 
 IX. Reports and auditing: , ' 
 
 104. Manager's report: (20) Monthly; 105. Contents: ; 106. Form: 
 
 ; 107. When is report presented : ; 108. Are audits made reg- 
 ularly: (34) Yes; 109. How often: (11) Monthly; 110. By com- 
 mittee: (21) Yes; 111. Cost: ; 112. By professional auditor: 
 
 (26) No; 113. Cost: (15) $56; 114. Auditor's report Includes: ; 
 
 115. Are members competent: (27) No. 
 X. Mechanical equipment: 
 
 116. Cash register: (39) Yes; 117. Customers' account file: (23) No — > 
 (20) Yes; 118. Typewriter (25) Yes; 119. Adding machine: (24) 
 Yes; 120. Filing equipment: (29) Yes; 121. Overhead carrier: (34) 
 No; 122. Check protector: (26) No; 123. Mimeograph: (39) No; 
 
 124. Addressograph : (41) No; 125. Other equipment: 
 
 XI. Business forms: 
 
 126. Constitution and by-laws: ; 127. Annual report: ; 128. 
 
 Stock certificate: ; 129. Membership certificate: ; 130. 
 
 Membership register : ; 131. Stock ledger : ; 132. Purchase 
 
 requisition : ; 133. Order for goods : ; 134. Settlement memo- 
 randum: ; 135. Duplicating sales slip: ; 136. Triplicating 
 
 sales slip: ; 137. Customers' ledger: ; 138. Billing ledger: 
 
 ; 139. Credit memorandum : ; 140. Credit rating blank : 
 
 ; 141. Cash sales ticket : ; 142. Business summary : ; 
 
 143. Cash receipts distribution: ; 144. Cash payments distribu- 
 tion : ; 145. Check, ordinary form : ; 146. Voucher check : 
 
 ; 147. Double entry ledger : ; 148. Journal : ; 149. Pur- 
 chase register : ; 150. Sales register : 
 
 XII. Comments on accounting system: 
 
 XI I L Resources: 
 
 151. Cash: (46) $2,074.78; 152. Merchandise inventories: (46) 
 $18,049.41; 153. Equipment: (48) $1,640.21; 154. Accounts receiv- 
 able: (46) $7,386.05; 155. Bills receivable: (46) $2,070.76; 156. 
 Real estate: (46) $3,550.54; 157. Miscellaneous^ (46) $2,092.58; 
 158. Total: (46) $26,864.33. 
 
 XIV. Liabilttes: 
 
 159. Capital stock: (46) $15,947.67; 160. Accounts payable: (46) 
 $5,056.09; 161. Bills payable: (46) $5,151.87; 162. Surplus: (46) 
 $4,353.10; 163. Undivided profits: (46) $5,182.74; 164. Unpaid divi- 
 dends: (46) $192.28; Miscellaneous :i (46) $980.58; 166. Total: (46) 
 $36,864.33. 
 
 1 Miscellaneous includes such items as interest, prepaid insurance, prepaid rent, and 
 unpaid labor. ' 
 
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 BULLETIN 394, U. 6. DEPABTMENT OF AGBICULTURE. 
 
 
 
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 XV. Summary of overhead ej-pensea: 
 
 167. Salaries and labor: (31) $4,695.93; 168. Rent: (23) $881.51; 169 
 Light and heat: (16) $137.14; 170. Insurance: (30) $301.81; 171. 
 Taxes: (21) $283.69; 172. Telephone and telegraph: (8) $43 44- 
 173. Interest: (25) $587.83; 174. Postage and stationery: (5)' 
 $174.89; 175. Miscellaneous (36) $5,417.29; Total: (41) $9 609 27- 
 177. Net profit for last year: (31) $5,749.33; 178. Net per cent profit ! 
 
 ; 179. Per cent on capital, including surplus and undivided 
 
 profits: 
 
 XVI. Monthly salaries: 
 
 ISO. President: ..._ ; 18L Secretary: ; 182. Treasurer: • 183 
 
 Manager: (42) $106; 184. Bookkeeper: (27) $68.87; 185. Ca.shier' 
 - — ; 186. Hefld salesman: (31) $74.13; 187. Other salesmen: (31) 
 $49.95; 188. Saleswomen: (26) $32.10; 189. Extra labor: • 190 
 
 Total : ' 
 
 XVII. Comments: 
 
 191. Is the business in satisfactory condition: (32) Yes. 192. Has the 
 business been reorganized: (37) No; 193. Why _ • 194 Ex 
 pansion planned: (30) No; 195. Educational propaganda:' (30)" No- 
 19a Probable future : (20) Bright ^ 197. Effect on service to the 
 
 patrons: ; 1S8. Effect on local commodity prices: _ 199 
 
 Effect on the community : . — ; 200. Cooperation with JtheV mer- 
 chants: (33) No; 201. How do expenses compare with private busi- 
 ness in town: (12) Same; 202. Are employees members: (24) No- 
 2as. Do they share in profits: ._..; 204. Which employees are 
 bonded : 
 
 GENERAL ORGANIZATION. 
 
 Owing to the fact that the enactment of cooperative laws in the 
 different States is a comparatively recent movement, a large propor- 
 tion of the stores examined were originally established under the 
 ordmary corporation laws. Most of them, however, are now organ- 
 ized under cooperative laws. At the time of this survey such law«; 
 had been enacted by 30 States, including all of the States- covered by 
 this study. Thirty-two out of 42 of the stores reporting on questions 
 14 and 15 were then organized under special cooperative laws. Those 
 which still retained the corporate form of organization adhered to 
 certain cooperative principles which were made a matter of agree- 
 ment between the members through their constitution and by-laws 
 For example, 40 of the stores had adopted the principle of 1 man 
 1 vote; while 5 of them adhered to the plan of voting \iccording- to 
 investment. It was noticed, however, that in the older associations 
 established under the corporate law there was a tendency for the 
 stock to pass into a few hands, and in several of these cases the store 
 was cooperative only in name. 
 
 An attempt was made to compile a table showing the size and 
 financial success of stores on the basis of nationality, occupation, and 
 
 * This Is the opinion of the managers. 
 
 A SURVEY OF TYPICAL COOPERATIVE STORES. 7 
 
 religion of those participating. Although the figures were not con- 
 clusive, nor sufficient for tabular presentation, they seemed to bear 
 out the opinion of many of the managers that a cooperative store is 
 apt to be more successful in a community which is made up of people 
 of one nationality. Similarly, in industrial communities, it was 
 found that stores are more successful where a large percentage of 
 the membership is of the same occupation ; and at least one case was 
 observed in which common church affiliation is the basis of successful 
 cooperation. 
 
 The membership ranges from 1,600 to 30, while the average for all 
 the stores surveyed was 228. Although there were some notable 
 exceptions, as a general rule it was found that the success of the 
 stores was almost in direct proportion to the membership. This may 
 be due to the fact that the well-managed store usually has little diffi- 
 culty in increasing its membership, while the poorly managed store 
 soon loses the support of the members with which it begins operation. 
 
 It was surprising to find so small a proportion of the stores con- 
 trolled by farmers' organizations, such as the Grange and the 
 Farmers' Union. As a matter of fact, the farmers' organizations 
 have taken (he initiative in starting many stores, but not finding 
 themselves strong enough to support the business out of their own 
 membership, they have thrown the conditions of membership open. 
 Even where such stores have been successful, they have frequently 
 had a bad effect upon the farmers' organization. In some cases the 
 farmers, expecting great things from their store, have allowed the 
 local farmers' organization to fall into decay, claiming that the store 
 was all the organization they required. In other cases, where the 
 store fathered by a farmers' organization has been a failure, the effect 
 has been even more disastrous to the association. 
 
 The survey brought out the fact that the location has a great deal 
 to do with the success of the store. The best location, however, is 
 not always synonymous with the most expensive or most central loca- 
 tion. Much depends upon the type of trade. In the case of stores 
 dependent largely upon country trade the proximity of horse sheds 
 and hitching facilities is an advantage. Such conveniences usually 
 can not be had in an expensive central location. On the other hand, 
 there are instances which tend to show that the store should not be 
 located too far from the points where country roads converge. 
 
 Five of the stores studied had undertaken the establishment of 
 branches in outlying districts. Almost without exception, the policy 
 of establishing such branch stores was found to be unsatisfactory. 
 In all cases the branches were found to be a heavy drain on the work- 
 ing capital of the parent store. It was also found that the members 
 in the branch district were inclined to rely for success upon the 
 parent association, thus weakening the branch. It appeared, too, 
 
 
 
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8 
 
 BULLETIN 394, U. S. DEPARTMENT OF AGRICULTURE. 
 
 
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 tiiat the average manager secured by cooperative stores lacks the 
 business abihty necessary for the management of more than one store 
 Hence, although the policy of establishing branches is right in prin- 
 ciple, as shown ni numerous cases under private and corporate man- 
 agement, notably the well-known chain stores, the results of this 
 survey would indicate that a cooperative store should consider the 
 matter with the greatest care before undertaking the establishment 
 oi branches. 
 
 It will be noticed that most of the stores have tlie usual officers 
 and board of directors. The most common number of directors is 5 
 and the usual term of office is 1 year. Questions directed upon this 
 policy seem to indicate that the 1-year term does not give sufficient 
 stabibty ot policy. Of course, it frequently happens that old direc- 
 tors are reelected; but in many instances new directoi-s are elected 
 at the end of each year, and it is stated that by the time they leave 
 office they are just begiiming to gain the experience necessary in order 
 to be of real value to the association. In the case of one of the most 
 successful stores many of the officers and directors had served for 
 over 20 years, and the by-laws provided that only one-third of the 
 directors should be elected annually. Even if new directors were 
 elected, which did not of t«n happen, at least two-thirds of the board 
 were always made up of experienced men. It was found that in some 
 associations the president was elected directly by the members and 
 was ex officio member of the board of directors. In the majority of 
 cases, however, he was elected by the members of the board from 
 among their number. It would appear that on the whole the latter 
 plan makes for greater efficiency. 
 
 It is a common practice for the by-laws to provide an auditing com- 
 mittee of two or three, to be elected from among the membership at 
 Its annual meeting. More rarely the auditors are appomted by the 
 board of directors. The experience gained by those making the sur- 
 vey leads to the conclusion that the auditing committee should act 
 as a connecting link between the membership and the management 
 keeping check at all times upon the business practice of the associa- 
 tion and counseling the directors whenever the condition of the busi- 
 ness appears to demand special attention. This would indicate that 
 the auditing committee should be elected by the members at their 
 annual meeting and be made directly responsible to them. 
 
 As will be more fully discussed in a later section, the results of the 
 survey bring out very clearly that one of the greatest weaknesses of 
 cooperative stores lies in the lack of thoroughness in their audits. 
 
 OPERATING ORGANIZATION. 
 
 The business organization of a cooi)erative store does not differ 
 materially from that of any other retail store. The business is usually 
 
 A SURVEY OP TYPICAL COOPERATIVE STORES. 9 
 
 too small to admit of the type of efficiency which can be secured only 
 by having specialists charged with definite responsibility for certain 
 divisions of the work. In most cases the manager himself is com- 
 pelled to be a sort of business jack-of-all-trades. He is usually the 
 I'esponsible head of the store, and at the same time must act as buyer, 
 head salesman, and bookkeeper. The man who combines efficiency in 
 all of these kinds of work is rarely found, and is usually in business 
 for himself. It is unusual for cooperative associations to be willing 
 or able to pay the salary which will secure a man of this type. The 
 salaries paid to the managers in the stores under consideration varied 
 from $45 to $250 per month, making an average of $106 a month for 
 the 42 stores for which figures were obtained. This fact alone is suffi- 
 cient to explain why the majority of the stores were not more success- 
 ful than the tables indicate. 
 
 From the tabulated results of the questionnaire on page 4 it will 
 be noted that only 7 stores report the employment of a man whose 
 specialty is to act as sales manager, 4 report a special buyer, 10 a 
 cashier, and 3 a stenographer. Thirty-one stores report the employ- 
 ment of a bookkeeper. Careful inquiry, however, leads to the con- 
 viction that all but a small proportion of these men are not capable 
 of keeping a satisfactory set of accounting records. It is the almost 
 unanimous verdict of the store managers that greater attention must 
 be given to the office end of the business, and that the auditing must 
 be more efficiently performed. 
 
 FINANCE. 
 
 The points covered in the section of finance bring out the essential 
 differences between the corporate and cooperative type of organiza- 
 tion. In general, it may be said that with the cooperative type the 
 shares of stock are smaller; that these shares do not determine the 
 voting power of the member ; that paid-in capital stock usually bears 
 a fixed rate of interest, while dividends are based upon the business 
 and not upon holdings of stock; and that certain restrictions are 
 placed upon stock transfer. The laws of most States require that a 
 definite authorized capital be fixed in the charter or articles of asso- 
 ciation, while in others the amount of stock need not be fixed. The 
 latter practice corresponds with the cooperative laws of several 
 European countries and aims to permit an indefinite growth in the 
 membership and capital stock. 
 
 For the 32 stores reporting the authorized capital, the average was 
 $45,437, while 41 stores giving the amount of capital subscribed 
 average $20,143, and 50 stores giving their paid-in capital average 
 $16,627. The shares of stock, as given in Table I, vary from $1 to 
 $100, with an average par value of $53. When questioned as to the 
 
 47614"— Bull. 394—16 2 
 
 
 rr 
 
 V'1 
 
 *l 
 
 Til 
 
 
 fl 
 

 \l 
 
 I* 
 11 
 
 
 
 ^i. 
 
 10 BULLETIN S9i, V. S. DEPARTMENT OF AGBICULTURE, 
 
 best size for a share of stock, most managers expressed themselves 
 as in favor of the share of large denomination. It seemed to be the 
 consensus of opinion that the share should not be smaller than $25 
 but an examination of Table I indicates that much depends upon con- 
 ditions. The character and density of population, the kind of busi- 
 ness conducted, nearness to wholesalers, and many other features 
 have a bearing on the best size for a share of stock. Well-capitalized 
 stores were found with shares of small denomination, while other 
 stores are very msufficiently capitalized on the basis of $100 shares 
 In general it is considered inadvisable for any store in the United 
 btates to begin operations ^dth a share of less than $10, although 
 here again there are exceptions. 
 
 Table I.—TJie capitalization of typical storcn. 
 
 Number 
 reporting. 
 
 Authorized . 
 Subscribed. 
 Paid up. . . 
 Par value... 
 Paid up 1... 
 
 32 
 40 
 60 
 44 
 40 
 
 Total. 
 
 11,454,000 
 825,898 
 831,377 
 
 High. 
 
 764, 026 
 
 $200,000 
 
 106,200 
 
 106,200 
 
 100 
 
 Low. Average. 
 
 $10,000 
 
 305 
 
 267 
 
 1 
 
 Vote: Forty stores allow 1 vote to each member; 5 stores allow l vote to each share of stock , 
 
 $45,437 
 
 20,647 
 
 16,627 
 
 53 
 
 19,100 
 
 'These are the 40 stores reporting subscribed capital, and are given separately for the sake of comparison. 
 
 Most of the stores allow members the privilege of paying for stock 
 in installments. Others, again, sell their stock and receive some 
 form of note or agreement to pay for it at a specified time. Botli 
 of these practices appear to have been greatly abused. The former 
 accounts to a large degree for the discrepancy between the paid-up 
 and subscribed capital as given in Table I, and the result of the latter 
 has been that many associations have accepted poorly drawn notes 
 which are not bankable, and which merely burden the books of the 
 association with fictitious assets. 
 
 The following abstract from an auditor's report is illustrative of 
 an abuse which has weakened many of the cooperative stores : 
 
 In view of the fact that a majority of your members have not liquidated their 
 note obligation in payment for shares, I recommend that no patronage dividend 
 be declared or paid covering the year 1914, and that the amount be carried as 
 
 ^^ ^^.'ii * * J . ^^'■'"'^ '"^' ^"^ conclusion, to express the hope that the mem- 
 bers will pay their notes and thereby place the company where it rightfully 
 belongs, and furnish the opportunity for it to grow large and successful. 
 
 A feature which probably has a greater influence on the successful 
 capit^hzatioji of a store than the size of the share of stock is the 
 amount of capital which one member may hold. Some of the earlier 
 cooperative laws fixed the upper limit which one member could hold 
 
 A SURVEY OF TYPICAL COOPEKATIVE STOEES. 
 
 11 
 
 at a figure which has since been recognized as too low. In the stores 
 under discussion the upper limit varied from $10 to $8,000, with 
 some stores placing no limit. It is difficult to say where the line 
 should be drawn. W-ith voting power restricted to 1 vote, with 
 interest on capital stock limited to not more than current interest 
 rates, and with the cooperative policy of distributing profits in pro- 
 portion to the amount of business transacted by each member, it is 
 difficult to see how serious injustice can result from the concentration 
 of the bulk of the capital stock in the hands of a few members. 
 
 Of those stores reporting, 37 stated that interest was paid on the 
 capital stock; the maximum given was 8 per cent, the minimum 5, 
 and the average 7 per cent. These figures do not indicate any great 
 advantage to the holders of capital stock. (See Table II.) 
 
 Table II. — Practice as to the payment of interest and dividends on stock. 
 
 Question. 
 
 Stores 
 
 reporting 
 
 yes. 
 
 Stores 
 
 reporting 
 
 no. 
 
 Average 
 rate. 
 
 Remarks. 
 
 Interest on stock 
 
 37 
 
 34 
 
 3 
 
 35 
 
 18 
 
 30 
 
 3 
 
 27 
 
 7 
 
 3 
 
 8 
 
 Per cent. 
 7 
 
 3, 7 per cent; 2, 5 per cent; 12, 
 
 Interest naid annuall v 
 
 8 per cent; 11, 6 per cent. 
 
 Tntftrest naid semiannuallv 
 
 
 
 
 Trade dividends naid to members 
 
 9 
 25 
 
 14 
 
 39 
 
 9 
 
 29 
 
 35 
 
 
 
 Trade dividends paid to nonmembers 
 
 Dividends naid annuallv 
 
 
 Usually half rate paid mem- 
 bers. 
 
 2 pay by means of a monthly 
 discount. 
 
 
 Dividends naid semiannuallv 
 
 
 Dividends usuallv naid in cash 
 
 
 
 Dividends usually paid in merchandise 
 
 Dividends usuallv naid in stock 
 
 
 
 
 
 
 
 
 The manifest purpose of the cooperative store is to make savings 
 for its members in the purchase of household and other supplies. 
 Patrons are charged the customary retail prices for the locality i» 
 which the store operates. Then, at the end of the specified period, 
 the accumulated surplus is distributed in proportion to the purchases 
 which each patron has made during the dividend period. Following 
 the Rochdale plan, nonmembers are frequently allowed half the rate 
 of dividends on purchases allowed members. 
 
 The figures given in answers to questions 51 and 57 of the question- 
 naire do not indicate the degree to which the cooperative stores are 
 attaining their chief object — making savings for patrons. They in- 
 dicate, rather, the provisions in the by-laws as to distribution of 
 dividends and not the actual practice. While the information given 
 was not satisfactory upon this point, it is believed that the vast ma- 
 jority of the cooperative stores have been a disappointment in the 
 savings effected for members and patrons.^ 
 
 1 See appendix, p., 30. Notes on the payment of trade dividends. 
 
 !'?' 
 W 
 
 m 
 
 
 
 m 
 
 !:?■■' 
 
 ■*■•'■ f'lTte.?---**^- 
 
12 
 
 [i 
 
 
 11"^ 
 
 Hi 
 
 ti 
 
 ■A ' 
 
 4' ' 
 
 BULLETIN 3W, U. 8. DEPARTMENT OF AGBICULTUKE. 
 
 CREDIT. 
 
 Practically all of the stores required, at times, more capital than 
 v^as provided by the sale of capital stock and accumulated surplus 
 The interest paid averaged 7 per cent, which can not be regarded as 
 
 ratLr i \ '" '^'' *^ \"'''''' ^^P^"^^ "P"" it« comme cial 
 rating. When a store is successful and has a high rating, it can secure 
 
 all the capital ,t needs upon the note of the association For manv 
 s rugghng stores, however, the only way in which credit cm^d be 
 obtained was by having those who were most interested indorse a 
 bankable note in favor of the association. In many cases esneci?ilv 
 .■here the borrowing has been done to bolster up a^oo 2 m'an 2 
 and ailing business, the practice of indorsing L notes oHheTs 
 sociation has been responsible for serious losses to members 
 
 Table III.— Practice as to credit. 
 
 Question. 
 
 Do you borrow money.. . 
 
 Rate of interest !^ 
 
 fc credit difficult to obtain .' .";.■;'"■ 
 
 Becunty req uired 
 
 Are bills discounted ropuiarly 
 
 ±.stlmated annual discount 
 Credit extended to customers.' .* .* " " 
 Losses due to credits. 
 Accoun ts paid promptly 
 
 Number 
 report- 
 ing. 
 
 37 
 
 I/OW. 
 
 24 
 
 • • • I 
 
 15 
 
 High. 
 
 Average. 
 
 T 
 
 6p. c't. iop.cV. 
 
 $150 
 $25 
 
 S6,949 
 'i4,23i 
 
 7 p. c't. 
 
 1997 
 
 $664 
 
 Yes. 
 
 No. 
 
 40 
 
 16 
 18 
 
 * ■ • < 
 
 45 
 
 I 
 
 25 
 
 33 
 20 
 15 
 
 2 
 5 
 
 iy.l^'^t •^''"''!! ^^'^^ ^"""^^ '^^^"" systematically used their credit at 
 
 iL f . ?! . 1 ^^ ^^"' '^ "^^ coininon, however, is indicated bv 
 <he fact that only 18 stores reported the uniform practice oUa kin ^ 
 advantage of discount, wliile 15 never discounted thS^Amo^^ 
 those reporting the practice of discounting their b lis thet^W 
 ranged from a minimum of $150 to a maximum of $7,000 ay a^^^ 
 with an average of $1,673 for the 18 stores taking regulax discounts 
 
 sot'Tl^fift ''^' f^^' rr' ^^^^^^^' is'^ven rS 
 
 pZoII T^^^^ ^'''. '' '^' '''^ ^^'"^"^^ ^^'^ - considerable 
 S^Tv. ^^^.^P^^ting expense. In addition to the saving 
 effected the practice of taking discounts has an important eS 
 upon the wholesa e hou^ and the buying efficiency of^lVe lie ' 
 Of 50 stores, only 2 were found to be doing a strictly cash bus Ls 
 Most of the managers claimed that the extension of credit t^cus 
 tomers was absolutely necessary. The time for which cdk s 
 allowed varied from 1 to 6 months, the average credit per 3 gi v^ 
 for 2i stores being 2 months. ^ ^ ^ 
 
 A SURVEY OF TYPICAL COOPERATIVE STORES. 
 
 13 
 
 The practice is unfair in that the man who pays cash usually 
 secures goods at practically the same price as the man w^ho uses 6 
 months' credit. This unfairness has led to the practice among a 
 few of the most successful stores of charging interest on all bills 
 running over 30 days. In many cases it was found that inexperienced 
 managers, in their enthusiasm to expand the business, had involved 
 the association in serious difficulty by a too wide and promiscuous 
 granting of credit to customers. In some instances it was found that 
 the accounts receivable amounted to more than the entire subscribed 
 capital stock. 
 
 On the other hand, one of the advantages claimed for the coopei-a- 
 tive farmere' store is that it serves as a credit institution, tiding 
 the members over until harvest or until " pay day." Indeed, one of 
 the most successful stores preferred to do a credit business, and 
 reported that 98 per cent of its trade w^as on this basis. The reasons 
 given for its preference were greater simplicity and uniformity in 
 its accounting system and the larger volume of trade resulting from 
 the credit business. The reports of 36 stores showed that, on the 
 average, half of the sales were on credit and the other half cash. 
 
 For 24 stores the average annual loss due to the granting of credit 
 is 1.17 per cent. This is much higher than the average for stores 
 under private management, as indicated by the results of the Harvard 
 survey, which found the common loss for bad debts to be one-half 
 of 1 per cent.' Moreover, there is reason to believe that this does 
 not tell the whole story. As a matter of fact, the estimate placed by 
 the manager of an unsuccessful cooperative store upon the uncollec- 
 tible proportion of the accounts and bills receivable, which he is 
 carrying upon his books, is very unreliable. In one case, which is 
 probably typical of many others, the amount was estimated at $145 
 for the year, when, in reality, the amount which was^afterwards 
 found to be uncollectible was nearer $2,000. This loss, of course, 
 falls upon all who pay for their goods. 
 
 Entirely apart from the loss involved, the credit system is unjust. 
 Either those enjoying credit should pay interest, or customers pay- 
 ing cash should receive a cash discount. The reports of those who 
 have tried to do business on a cash basis indicate that the credit svs- 
 tem has become so rooted in American business as to be practically 
 ineradicable. Many of those questioned characterized it as " a ne<?es- 
 sary evil." 
 
 PURCHASING. 
 
 Table IV, showing the practice regarding purchasing, is largely 
 self-explanatory. One important fact, however, is not brought out 
 
 * Harvard University. Bureau of Business Research. Bui. 5 : Expenses in Operating 
 Retail Grocery Stores. 1915. Sup. 7. 
 
 I 
 
14 
 
 BULLETIN 394, t'. S. DEPARTMENT OF AGRICULTtTRE. 
 
 
 
 
 1^ 
 
 by the table— a fact which many merchants overlook. The most suc- 
 cessful stores confine their purchases to a few reliable firms, rather 
 than scatter their orders among too many wholesale houses. In fact, 
 one store on the verge of bankruptcy ascribed its failure in large part 
 to this practice, since, in time of difficulty, it could claim but little 
 support from its numerous creditors. Among the many objections 
 to scattered buying are: (1) Greatly increased and useless'office work; 
 (2) divided support of the wholesalers; (3) excessive buying and 
 danger of overexpansion ; (4) too great diversity of stock;' and (5) 
 loss of advertising opportunity afforded by standard lines. 
 
 Taule IV. — Practice in ptirchamip. 
 
 Question. 
 
 No. re- 
 peat inc 
 
 Low. 
 
 nigh. 
 
 Aver- 
 age. 
 
 Yes. 
 
 Na. 
 
 Largely from salesman , 
 
 From catalogue houses . . .■ ', 
 
 From manufacturers \',\\ 
 
 
 
 
 
 43 
 19 
 24 
 
 27 
 
 io" 
 
 on 
 
 a 
 
 19 
 
 Produce from f:\rmers 
 
 All orders reduced to writincr. 
 
 lu voices checked systematically '.'.'.'.'.'.'.'.'.'.'." 
 
 22* 
 
 ii.'soo" 
 
 J35.666" 
 
 iuVm 
 
 11 
 80 
 
 ' — — ^— — ____^___ 
 
 
 
 
 
 AV is 
 
 It 
 
 on 
 e 
 
 is interesting to note that only 27 stores believed that they 
 bought at the lowest price, while 11 said positively that they bought 
 at a disadvantage. The reasons given were: (1) Inability to take 
 advantage of discounts, and (2) in a few cases, discrimination o 
 the part of wholesale houses against the cooperative store. Th 
 former handicap is to be traced generally to such causes as insuffi- 
 cient original capital, tying up of capital in accounts receivable, over- 
 investment in slow-moving or dead stock, loss of capital through 
 bad management, etc. On the latter point a few stores asserted thTit 
 they were sometimes discriminated against in the prices they were 
 compelled to pay; that they were not given equal credit privileges 
 with private and corporate enterprises ; and that they were refused 
 certain lines of goods at any price. Credit men say that this obtains 
 only when the store has unsatisfactory credit rating or record and 
 when cut prices and discounts are allowed on fixed-price goods. 
 
 SELLING. 
 
 As shown in Tables V and X, the annual sales of the stores under 
 consideration ranged from $7,500 to $628,703, with an average ap- 
 proximating $88,000. Table X includes only 35 out of the 60 stores 
 visited during the survey, and it will be noticed that of these 5 were 
 unable to give sufficiently complete data for a statistical estimate 
 of their financial success. 
 
 A SURVEY OF TYPICAL COOPERATIVE STORES. 
 
 Table V. — Practice as to selling. 
 
 15 
 
 Question. 
 
 Per cent coimtry trade 
 
 Per cent town trade 
 
 Per cent membership trade . . . . 
 Per cent nonmembership trade. 
 
 Per cent active members 
 
 Per cent nonactive meml^ers. . . 
 
 Per cent cash sales 
 
 Per cent credit sales 
 
 Total sales 
 
 Rate of profit on sales ^ 
 
 Stores re- 
 port ing. 
 
 Low. 
 
 High. 
 
 43 
 
 
 
 95 
 
 43 
 
 5 
 
 100 
 
 42 
 
 10 
 
 98J 
 
 42 
 
 li 
 
 90 
 
 37 
 
 25 
 
 100 
 
 37 
 
 
 
 to 
 
 36 
 
 2 
 
 85 
 
 36 
 
 15 
 
 98 
 
 45 
 
 $7,500 
 
 $623,703 
 
 36 
 
 12 p. ct. 
 
 30p.ct. 
 
 Average. 
 
 63 
 37 
 60 
 40 
 80 
 20 
 50 
 50 
 $87, 781 
 20 p. ct. 
 
 I This is the estimate made by managers (see Table X). 
 
 The percentage of expense to sales indicates a wide variation, 
 ranging from 7 to 17 per cent. Even more surprising is the range in 
 the percentage of gross profit made on the business, ranging from 
 10.5 per cent to 24.5 per cent. In accounting for this range one ele- 
 ment is the kind of business. The higher figures are for businesses 
 having a large trade in dry goods, shoes, and men's furnishings, 
 while the lower rates were made in stores handling groceries and a 
 few farm staples. The percentage of net profits to sales shows the 
 variation one would expect. 
 
 Almost all of the stores under survey were located in country 
 towns, with the majority of the membership drawn from the farms. 
 Hence there is an average of 63 per cent of farmers' patronage for the 
 43 stores reporting, with a range of from 4 per cent to 95 per cent of 
 country trade. 
 
 Most of the stores reported a large percentage of nonmembership 
 trade, the range being from 1^ per cent to 90 per cent, with an average 
 for the 42 stores reporting of 40 per cent of the trade from non- 
 members. 
 
 This nonmembership patronage is due to several factors. Eighteen 
 of the stores hold out the prospect of some dividends on purchases 
 to nonmembers, thus securing trade. Again, many persons are in 
 sympathy with the cooperative movement and expect to become 
 members if the store succeeds, and in the meanwhile they give it a 
 share of their trade. FinalW, a great deal of the nonmembership 
 trade which falls to cooperative stores is more or less accidental and 
 due to the fact that many Americans gite little thought to their 
 choice of a place to trade. This indifference also helps to some extent 
 to account for the fact that 34 stores reported an average of 20 per 
 cent of their members as " nonactive," showing little interest in the 
 store and giving it practically none of their trade. 
 
 It was found that success, loyalty of members, and nonmember- 
 ship trade hang very closely together. Let a store fall behind and 
 fail to pay dividends and it soon loses the support of both members 
 
 f 
 
 h 
 
 I-:. 
 
 '•C-l 
 
 m 
 
 ^ 
 
 
 u 
 
 
4'; 
 
 i'x-L. I. ' 
 
 ^i* 
 
 16 BULLETIN 3&4, U. S. DEPARTMENT OF AGRICULTURE. 
 
 and nonmembers. The opposite case is illustrated by the experience 
 of one of the most, successful stores, which in 26 years has missed 
 paying a dividend but once. It reported 100 per cent active mem- 
 bers and a large nonmembership trade. 
 
 It must be admitted that in general the results in net profits are 
 J somewhat discouraging. Only 11 stores out of 60, or 18^ per cent, 
 
 ^ were able to show a net profit of 5 per cent or over. 
 
 If we conclude, as we are forced to do, by the supplementary notes 
 found in the questionnaires, that the 30 stores for which the net 
 profits could not be calculated would make a still poorer showing, 
 we are convinced that much greater caution should be exercised 
 before starting cooperative stores. 
 
 ACCOUNTING, REPORTS, AND AUDITING. 
 
 One of the principal objects of this survey was to ascertain the 
 busmess practice of existing cooperative stores and to study their sys- 
 tems of accounting and auditing. Questions 93 to 150 in the ques- 
 tionnaire show the different points which were studied with great 
 care. In addition to recording the answers to these questions, the 
 investigator aimed to see as much of the accountmg and office system 
 as time and conditions would permit. As has been stated, the survey 
 made evident th^t the business practice, including the system of 
 records, is probably the weakest point in the management of coop- 
 erative stores. Investigations by the Office of Markets and Rural 
 Organization have shown this to be true of nearly all other coopera- 
 tive enterprises.^ 
 
 This weakness is due to lack of training on the part of the managers 
 themselves, to inability to pay the salary required by trained ac- 
 countants, and to the general failure on the part of the membership 
 of cooperative associations to realize the importance of a clear and 
 constant record of the state of their business. 
 
 To the question, "Is the accounting system satisfactory?" 20 
 managers answered in the affirmative, 16 answered "Fair," 9 an- 
 swered in the negative. The investigator's " remarks " show that the 
 closer examination which he made of the systems led him to believe 
 that a very small proportion of the stores visited had what could 
 reasonably be called a satisfactory system of accounting. In fact in 
 almost 50 per cent of the cases, the results of the attempts to get 
 answers to questions relating to the status of the business showed 
 that the managers themselves had no definite records from which 
 they were able to give a satisfactory statement of the condition of 
 the business. 
 
 » Bassett, C E. Moomaw. Clarence W.. and Kerr. W. H., Cooperative Marketln;? and 
 
 IsT^fo'' ll^'Tu^ ^r. "J''°" '" ^'- ^- ""''''- «^ Agriculture Yearbook IQli, pp 
 18^210. Kerr ^.11 and Nahstoll, G. A., Cooperative Organization Business Metl^ods 
 U. S, Dept. of Agr. Bulletin 178, 1916, p. 20. i^ieiuous, 
 
 A SUBVEY OF TYPICAL COOPERATIVE STORES. 
 Table VI. — t^howing business practice, accounting, and auditing. 
 
 17 
 
 Question. 
 
 Yes. 
 
 No. 
 
 Month- 
 ly. 
 
 Quar- 
 terly. 
 
 Semian- 
 nually. 
 
 Annu- 
 ally. 
 
 Kemarks. 
 
 Bfttisfactorv svstem 
 
 20 
 36 
 9 
 42 
 .12 
 10 
 10 
 
 40 
 
 34 
 21 
 17 
 
 8 
 
 9 
 5 
 
 28 
 3 
 27 
 32 
 34 
 
 9 
 
 8 
 22 
 26 
 27 
 
 
 
 
 
 15 fair. 
 
 Double en trv. 
 
 
 
 
 
 
 Total cash deposited daily 
 
 Sales si IDS Used 
 
 ..•••••. 
 
 
 
 
 
 
 
 
 
 - ' 
 
 Cash couDons used 
 
 
 
 
 
 
 Billins ledger used 
 
 
 
 
 
 
 Cost accounts kept by depart- 
 ments. 
 Manager reports regularly 
 
 Are audits made regularly 
 
 By committee of members 
 
 Bv nrofessional auditor 
 
 
 
 
 
 
 20 
 11 
 
 1 
 
 2 
 
 18 
 3 
 
 . 9 
 10 
 
 8 report both monthly 
 
 and amiually. 
 3 weekly; 3 bimonthly. 
 
 
 
 
 
 
 Are members comnetent 
 
 
 
 
 
 
 Cost ner vear 
 
 
 
 1 
 
 High, $300; low, $30; 
 
 Cash register used 
 
 39 
 20 
 25 
 24 
 29 
 10 
 17 
 
 6 
 23 
 19 
 20 
 15 
 34 
 26 
 
 
 
 
 
 average, $56. 
 
 Customers account file. 
 
 
 
 
 
 Tvoewriter 
 
 
 
 
 
 
 Ado insT machine 
 
 
 
 
 
 
 Satisfactory' filing equipment 
 
 Overhead carrier 
 
 
 
 
 
 
 
 
 
 
 
 Check Drotector . ..... . . 
 
 
 
 
 
 
 
 
 
 
 
 
 One thing that impressed the investigator was the lack of uniform- 
 ity of sj^stems, forms, and equipment. This lack made it very diffi- 
 cult to. secure statistics which would give a comparative estimate of 
 the success of the stores. The investigation conducted by Harvard 
 University in its attempt to bring about standardization of accounts 
 and office methods disclosed the same lack in practically all other 
 retail stores. 
 
 Among cooperative stores, a beginning in the right direction has 
 been made by two or three promoters who are attempting to install 
 uniform systems of accounting and auditing for the stores they 
 organize. An examination of the work of these promoters, however, 
 tends to show that the good they are accomplishing is largely offset 
 by the fact that they have started many stores for which there was 
 not sufficient demand in the locality, and which were therefore 
 doomed to failure from the start. Moreover, they have frequently 
 advised an association to purchase an old and sometimes failing 
 business, and in many of these instances the cooperative association 
 found itself in possession of a large stock of shopworn goods and a 
 tradition for inefficiency in the store which was hard to live down, 
 although it had been paid for as " good will." 
 
 No less than 36 of the stores reported that their books were kept 
 by double entry ; but where it was possible to get at the facts, it was 
 found that the systems were very imperfect, and that in many cases 
 it would have been difficult to secure a trial balance from the records. 
 It is probable, however, that the fundamental weakness is in the 
 bookkeepers rather than in the systems of accounting. This is shown 
 in a number of instances where systems of accounting, installed by 
 experts, have become entirely disorganized through the inefficiency 
 
 
 
 I 
 
18 
 
 BULLETIN 394, U. S. DEPARTMENT OP AGRICULTURE. 
 
 A SURVEY OF TYPICAL COOPERATIVE STORES. 
 
 19 
 
 I '4' 
 
 1 1, 
 
 If 
 
 i! 
 
 4 
 
 
 I- 
 
 
 of the bookkeepers. On the other hand, one of the most successful 
 stores studied in the survey had an accounting system which was 
 crude and out of date. Although the system was kept in a set of 
 old-style books, which necessitated a great waste of energy, the work 
 was done so thoroughly that the records were up to date at all times, 
 and at a moment's notice the management could find out the exact 
 state of the business. 
 
 One good feature in the systems of records is the almost universal 
 use of the duplicating or triplicating sales slips. In those cases where 
 the triplicating sales slip was used systematically, and the triplicates 
 carefully checked at the close of each day, the office system was found 
 to be securing fairly accurate results. 
 
 The cash coupon seems to have gone out of favor; only 12 reported 
 using it and 27 answered in the negative. Among the 12, several 
 forms were found. The most common was the book form with cou- 
 pons of different denominations perforated for ready detachment. 
 Another type resembled the mileage book commonly used on rail- 
 roads, with cents represented instead of miles. Various forms of 
 tickets and metal checks were used in paying for produce. Like the 
 coupons, these were redeemable in goods. 
 
 The billing ledger was reported as being used in 10 stores, while 
 32 answered in the negative. When it is not used, amounts of sales 
 are either posted from the sales slips to an ordinary ledger, from 
 which statements are rendered at the end of each month, or the sales 
 slips are filed in the short-account filing cabinet as customers' ledger 
 accounts. 
 
 Ten stores reported that they were keeping cost accounts by de- 
 partments, while 34 reported in the negative. Further examination, 
 however, showed clearly that not over 1 or 2 stores out of the 60 
 actually kept accounts by departments in such a way as to show the 
 cost of operation and profits for each department of the business 
 Closer questioning revealed the fact that the stores recognized the 
 advantage of having departmental accounts, and intended to or- 
 ganize their bookkeeping system on that plan ; but for various rea- 
 sons, usually because of the lack of a sufficiently trained bookkeeper, 
 they had not yet put their plans into operation. 
 
 The by-laws of practically all of the stores examined require that 
 the manager shall make reports at stated intervals. This provision 
 seems to be adhered to with more or less regularitv. Twenty of the 
 stores required the manager to report monthly, 18 semiannually 9 
 annually, 1 quarterly, and 1 daily. Eight of those requiring 'an 
 annual report wei-e included among those requiring a monthly report. 
 Defective as are the bookkeeping systems of cooperative stores, 
 their auditing is still more unsatisfactory, although 32 reported that 
 
 a regular audit is made. Of these, 13 required that the audit be made 
 weekly, 11 monthly, 3 bimonthly, 2 quarterly, 3 semiannually, and 
 10 annually. In addition to these, several others stated that they had 
 an audit at more or less irregular intervals. When questioned as to 
 the auditors, 21 stated that the auditing was done by a committee 
 elected from the membership, while 17 reported that the services of 
 a professional auditor were secured. When further questioned as to 
 the cost per year of the auditing, only 15 stores reported a regular 
 outlay for this purpose. Of these, the highest gave an annual cost 
 of $300, while the lowest was $30, the average for the 15 stores being 
 $56 each. 
 
 The results of this survey demonstrate that the precariousness of 
 the cooperative mercantile business is due to inefficient accounting and 
 auditing more than to any other single cause. Where complete records 
 are kept of the business, and where these are used as the basis of a 
 regular monthly financial report, there is furnished a continuous 
 barometer by which a board of directors can take warning at the first 
 signs of mismanagement or failing business. In addition to this, at 
 the end of each fiscal year some competent outsider, preferably a cer- 
 tified public accountant, should be hired to audit the records for the 
 vear. 
 
 Of course it must be recognized that efficient bookkeeping and ex- 
 pert auditing cost more than the small cooperative business can 
 afford. Much progress toward efficiency, however, may be secured by 
 the adoption of some simple standardized system of bookkeeping and 
 business practice that will give complete and accurate records which 
 can be easily interpreted. To meet this need the United States 
 Department of Agi'iculture has devised a system which is described 
 in Department Bulletin No. 381, entitled " Business Practice and 
 Accounts for Cooperative Stores." 
 
 The auditing committee elected by the members should not under- 
 take to do the annual auditing itself, unless it enjoys the rare advantage 
 of having a certified public accountant in its membership. The mem- 
 bers of the committee should know enough of bookkeeping to appre- 
 ciate the necessity of accuracy. They should see to it that this is 
 accomplished, and the association should make pro^dsion for the 
 necessary expense. 
 
 These conclusions have been borne out by the long experience of 
 the Rochdale stores in England. Their experience is summarized in 
 the preface to "A Manual of Auditing," published by the Coopera- 
 tive Union (Ltd.), with headquarters at Manchester, England, for 
 the guidance of the societies. The author says: 
 
 It Is esKsential to the interest of members of societies generally that ^eat 
 attention be paid to the importance of strict audit, first, for self-protection; 
 
 II 
 
 ■ V 
 
 A- 
 
 \\ 
 
 
 
 •■!* 
 
 I 
 
20 
 
 BULLETIN 394, U. S. DEPARTMENT OF AGRICULTUEE. 
 
 H 
 
 Ire 
 
 %l 
 
 ft 
 
 h 
 
 * ■■■' 
 
 :fc,. 
 
 second, in the interest of the societies generally ; third, for the protection of 
 the creditors with whom the society may do business ; fourth, for the main- 
 tenance of the reputation of the cooperative movement. The true end and aim 
 of every system of audit being supervision, external check, and testimony 
 
 !rrr"'!.''""'^ ."'^ "^^'"^ "* ^'^ "^'^^'^ °* cooperative societies under^ 
 standing the principles of bookkeeping, followed up by an efficient and strict 
 audit of accounts. With this end in view, we propose to lay down a treatise, 
 arranged in systematic order, placing fully before those who mav consult the^ 
 pages a safe mode for auditing the transactions of societies. 
 
 EQUIPMENT. 
 
 The answeis to the questions on mechanical equipment which are 
 summarized in Table VI are self-explanatory. They indicate that the 
 average cooperative store is about as well equipped as the average 
 store under private or corporate management. There was a wide 
 variation in the stores studied, however. The equipment ranged from 
 small, poorly lighted, and insanitary stores, without cash registers, 
 faling equipment, or any other mechanical convenience, to one or two 
 ot the most modern stores to be found in the United States (see PI I) 
 
 It was found that most of the managers appreciate the economy of 
 many of the devices entering into modern store equipment, apd their 
 absence m a store is usually due to a lack of funds. There is also 
 a general demand among patrons of all classes for a store that is 
 up to date m its equipment and appearance. (See PI. II.) To some 
 extent this demand would seem to be part and parcel of the modern 
 efliciency movement, which is reaching a considerable proportion of 
 farm homes m the form of modem household conveniences and farm 
 appliances. 
 
 THE BALANCE SHEET. 
 
 Table VIII and Sections XIII and XIV of the questionnaire pre- 
 sent a summary of the resources and liabilities for 46 stores The 
 most interesting figures are those showing the surplus, undivided 
 iT^fn^/"*^ ""P*''^ dividends, amounting to a total of close to 
 ^60,000, or an average of almost $10,000 per store. From these fig- 
 ures It would appear that the stores are in a very prosperous condi- 
 tion. Only 4 stores out of 46 show a deficit aggregating $9 214 
 Moreover, if to the amount of average surplus, undivided profits! 
 and unpaid dividends, the capital stock of $15,948 is added the 
 total average resources will exceed the average liabilities by $25 676 
 If the stores are in such splendid financial condition, why is it 
 that most of them are not paying regular dividends? The fact is 
 that for the majority of the stores this prosperity is more apparent 
 than real. In the first place, the stock carried is too large and the 
 average number of stock turns a year too low. Many of the stores 
 are carrying a lot of stock which is dead for the greater part of the 
 
 Bul. 394, U. S. Dept. of Agriculture. 
 
 Plate I. 
 
 I- 
 
 UJ 
 < 
 
 > 
 
 oc 
 111 
 o 
 o 
 
 O 
 
 UJ 
 
 > 
 
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 a. 
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 111 
 
 I 
 
 i 
 
 M 
 
 
 'U 
 
INTENTIONAL SECOND EXPOSURE 
 
 20 
 
 BULLETIN 394, U. S. DEPARTMENT OF AGEICULTUEE. 
 
 second, in the interest of the societies generally ; third, for the protection of 
 the creditors with whom tlie society may do business ; fourtli, for the main- 
 tenance of tlie reputation of tlie cooperative movement. The true end and aim 
 of every system of audit being supervision, external check, and testimony 
 experience proves tlie necessity of the officers of cooperative societies under- 
 standing the principles of bookkeeping, followed up by an efficient and strict 
 audit of accounts. With this end in view, we propose to lay down a treatise 
 arranged in systematic order, placing fully before those who mav consult these 
 pages a safe mode for auditing the transactions of societies. 
 
 EQUIPMENT. 
 
 The answers to the questions on mechanical equipment which are 
 summarized in Table VI are self-explanatory. They indicate that the 
 average cooperative store is about as well equipped as the avera^^e 
 store under private or corporate management. There was a wide 
 varuition in the stores studied, however. The equipment ranged from 
 small, poorly lighted, and insanitary stores, without cash registers 
 filmg equipment, or any other mechanical convenience, to one or two 
 of the most modern stores to be found in the United States (see PL I). 
 
 It was found that most of the managers appreciate the economy of 
 many of the devices entering into modern store equipment, apd their 
 absence in a store is usually due to a lack of funds. There is also 
 a general demand among patrons of all classes for a store that is 
 up to date in its equipment and appearance. (See PL II.) To some 
 extent this demand would seem to be part and parcel of the modern 
 efficiency movement, which is reaching a considerable proportion of 
 farm homes in the form of modem household conveniences and farm 
 appliances. 
 
 THE BALANCE SHEET. 
 
 Table YIII and Sections XIII and XIV of the questionnaire pre- 
 sent a summary of the resources and liabilities for 4G stores The 
 most interesting figures are those showing the surplus, undivided 
 profits, and unpaid dividends, amounting to a total of close to 
 $460,000, or an average of almost $10,000 per store. From these fi<T- 
 ures It would appear that the stores are in a very prosperous condi- 
 tion. Only 4 stores out of 46 show a deficit aggregating $9,214. 
 Moreover, if to the amount of average surplus, undivided profits 
 and unpaid dividends, the capital stock of $15,948 is added, the 
 total average resources will exceed the average liabilities by $25,676 
 
 If the stores are in such splendid financial condition, why is it 
 that most of them are not paying regular dividends? The fact is 
 that for the majority of the stores this prosperity is more apparent 
 than real. In the first place, the stock carried is too large and the 
 average number of stock turns a year too low. Many of the stores 
 are carrying a lot of stock which is dead for the greater part of the 
 
 Bui. 394, U. S. Dept of Agriculture. 
 
 Plate I. 
 
 I- 
 
 UJ 
 
 cc 
 
 < 
 
 o 
 z 
 < 
 
 >- 
 
 U 
 
 o 
 o 
 
 cc 
 
 O 
 
 LJ 
 > 
 
 I- 
 < 
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 UJ 
 Q. 
 
 o 
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 o 
 
 z 
 
 IT 
 U 
 O 
 O 
 
 2 
 
 u. 
 O 
 
 a: 
 o 
 
 cr 
 111 
 
 •- 
 X 
 
 m 
 
 DKSb^ 
 
Bui. 394, U. S. Dept. of Agriculture. 
 
 Plate II. 
 
 riv 
 
 i¥- 1 i^ ' 
 
 UJ 
 
 < 
 
 Q 
 
 Z 
 < 
 
 >• 
 
 a: 
 111 
 O 
 O 
 cr 
 
 O 
 
 tu 
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 < 
 
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 o 
 
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 z 
 
 A SURVEY OF TYPICAL COOPERATIVE STORES. 
 
 21 
 
 year, and are listing at full value goods which are shopworn and 
 upon which it will never be possible to realize in full. Then, too, 
 the accounts receivable, bills receivable, and miscellaneous assets, with 
 a total of over $700,000, an average of $15,000 per store, contain 
 many items which can never be collected and should be dropped, 
 as they only becloud the financial condition of the store. As an 
 illustration, one small store has been carrying $1,200 worth of notes 
 taken for shares of stock, although they are all past due; and the 
 same association has on its books over $2,000 in accounts which might 
 almost as well be wiped out and charged off to loss and gain. This 
 large proportion of more or less fixed and doubtful assets probably 
 goes far toward explaining the reason why dividends can not be paid. 
 
 Table VII. — The halance sheet. 
 [46 stores.] 
 
 Resources: 
 
 Cash 
 
 Merchandise .... 
 
 Equipment 
 
 Acoounts receivable. 
 
 Notes receivable 
 
 Miscellaneous 
 
 Total. 
 
 Liabilities: 
 
 Capital stock 
 
 Bills payable 
 
 Acoounts payable . 
 
 Surplus 
 
 Undivided profits. 
 Unpaid dividends. 
 Miscellaneous 
 
 Total. 
 
 Total resources 
 
 Total liabilities. CTClusive of capital stock, surplus, 
 undivided profits, and impaid dividends 
 
 Total net worth. 
 
 Total. 
 
 $95,439.97 
 830,272.96 
 
 75,449.40 
 339,758,05 
 
 95,255.10 
 259,583.69 
 
 1.695,759.17 
 
 733, 592. 74 
 236,980.04 
 232,579.93 
 200,242.68 
 238,406.18 
 8, 844. 96 
 45, 106. 64 
 
 High. 
 
 $20,997.40 
 98.460.12 
 10.195.88 
 48,549.71 
 12,253.77 
 28,502.83 
 
 Low.i 
 
 $28.15 
 
 800.00 
 
 23.00 
 
 201,091.24 1,113.00 
 
 106,200.00 
 22.000. CO 
 18,363.84 
 33,318.14 
 13,750.60 
 3,343.92 
 19,200.00 
 
 1.695,759.17 201,091.24 
 
 267.00 
 
 6.02 
 5.57 
 
 30.00 
 
 1,113.00 
 
 1,695,759.17 
 514,672.61 
 
 1,181,086.56 
 
 Average. 
 
 $2,074.78 
 18,049.41 
 1,640.21 
 7.386.05 
 2,070.76 
 5,643.12 
 
 36,864.33 
 
 15,947.67 
 5,151.87 
 5,056.00 
 4,353.10 
 6,182.74 
 192. 28 
 980.58 
 
 3S.864.33 
 
 36,864.33 
 11,188.54 
 
 25,675.79 
 
 » Fisrures in these columns are independent of each other, and the totals represent high and low totals 
 not totals of the other figures given. 
 
 OPERATING EXPENSES. 
 
 Table ^n[II shows the annual operating expenses of 41 stores. 
 This table shows salaries and labor, which appear separately in 
 Table IX. The comparative statement of expenses in relation to 
 net sales is found in Table X, which should be studied carefully in 
 this connection. The number of stores reporting each of the various 
 items in Table VIII indicates how difficult it was to get satisfactory 
 figures under the different subheads in the questionnaire. In fact, 
 it was found to be impossible to make a segregation of the expenses 
 on account of the difference in classification used by the stores. Many 
 
 -: 
 
 f: 
 
INTENTIONAL SECOND EXPOSURE 
 
 Bui 394, U. S. Dept. of Agriculture. 
 
 Plate II. 
 
 A SURVEY OF TYPICAL COOPERATIVE STORES. 
 
 21 
 
 year, and are listing at full value goods which are shopworn and 
 upon which it will never be possible to realize in full. Then, too, 
 the accounts receivable, bills receivable, and miscellaneous assets, with 
 a total of over $700,000, an average of $15,000 per store, contain 
 man}^ items which can never be collected and should be dropped, 
 as they only becloud the financial condition of the store. As an 
 illustration, one small store has been carrying $1,200 worth of notes 
 taken for shares of stock, although they are all past due; and the 
 same association has on its books over $2,000 in accounts which might 
 almost as well be wiped out and charged off to loss and gain. This 
 large proportion of more or less fixed and doubtful assets probably 
 goes far toward explaining the reason why dividends can not be paid. 
 
 Tarle VII. — The halnnce sheet. 
 [40 stores.] 
 
 Resources: 
 
 Cash 
 
 MerchaiKlise 
 
 Equipment 
 
 Acoounf n leceivable. . . 
 
 Notes retvivable 
 
 Miscellaneous 
 
 Total. 
 
 $05,439.97 
 830,272.96 
 
 75,449.40 
 339,758,05 
 
 95; 255. 10 
 259.5S3.69 
 
 Total 1.605,759.17. 
 
 High. 
 
 ?20,997.40 
 98. 460. 12 
 10.195.88 
 48.. 549. 71 
 IJ.253.77 
 28. 502. 83 
 
 Low.i 
 
 $28. 15 
 
 800.00 
 
 23.00 
 
 201,091.24 1,113.00 
 
 Llabilltie.s: 
 
 Capital stock 7.33, 592. 74 
 
 Bills payable j 230,986.04 
 
 Acoounts payable - 232, 579. 93 
 
 Sun^lns 200.242.68 
 
 - - 238,406.18 
 
 8,^4.% 
 45.106.64 
 
 Undivided profits. 
 Unpaid dividends. 
 Miscellaneous 
 
 Total. 
 
 Total rcsoui-ces 
 
 Total liabilities. exclusive of capital stock, surplus, 
 undivided profits, and impaid dividends 
 
 Total net worth. 
 
 106,200.00 
 22.000. €0 
 18,363.84 
 33,318.14 
 13,750.60 
 3,343.92 
 19.200.00 
 
 267.00 
 
 6.02 
 5.57 
 
 30.00 
 
 Average. 
 
 $•2,074.78 
 
 18,049.41 
 1,640.21 
 7,. 386. 05 
 2,070.76 
 5.643.12 
 
 36,864.33 
 
 15,947.67 
 5,151.87 
 5,056.00 
 4,3.53.10 
 
 6,le;2.74 
 192. 28 
 980.58 
 
 1.695,759.17 201.00124 1 1,113.00 
 
 1,695,759.17 
 514.672.61 
 
 1,181,086.56 
 
 33.864.33 
 
 36, 864. 33 
 11,188.54 
 
 25,675.79 
 
 1 Fi^ircs in these columns are independent of each other, and the totals represent high and low totals 
 not totals of the other figures given. 
 
 OPERATING EXPENSES. 
 
 Table VIII shows the annual operating expenses of 41 stores. 
 This table shows salaries and labor, which appear separately in 
 Table IX. The comparative statement of expenses in relation to 
 net sales is found in Table X, which should be studied carefully in 
 this connection. The number of stores reporting each of the various 
 items in Table VIII indicates how difficult it was to get satisfactory 
 figures under the different subheads in the questionnaire. In fact, 
 it was found to be impossible to make a segregation of the expenses 
 on account of the difference in classification used by the stores. Many 
 
 t 
 
 I :i 
 
22 
 
 BULLETIN 394, U. S. DEPARTMENT OF AGKICULTUKE. 
 
 J i" ' 
 
 4 
 
 m 
 
 I ^'f/ 
 
 
 of them did not segregate their expense accounts at all, but included 
 everything under the one title of " General expense." 
 
 Table VIII. — Annual operating expense. 
 
 Salary and labor 
 
 Rent 
 
 Light and heat 
 
 Insurance 
 
 Taxes 
 
 Telephone and telegraph. 
 
 Interest 
 
 Postage and stationery. . , 
 Miscellaneous 
 
 Number 
 of stores. 
 
 Total expense ' . 
 
 Profit for year. 
 Loss for year . . 
 
 31 
 23 
 16 
 30 
 21 
 
 8 
 25 
 
 5 
 36 
 
 41 
 
 31 
 2 
 
 Total. 
 
 High. 
 
 $145,553.98 
 
 20,279.76 
 
 2, 194. 18 
 
 9,054.41 
 
 5,957.55 
 
 347. 50 
 
 14,695.68 
 
 874. 44 
 
 195,022.36 
 
 393,979.86 
 
 Low. 
 
 $12,021.95 
 
 1,800.00 
 
 2:;0. 00 
 
 1, 905. 44 
 
 1, 2.:9. 22 
 
 56.00 
 
 2,300.00 
 
 644. 32 
 
 83,623.79 
 
 86, 553. 74 
 
 178,229.31 
 2, 4,53. 38 
 
 $720.00 
 84.00 
 24.00 
 22.00 
 25.00 
 25.00 
 37.00 
 25.00 
 7.10 
 
 946.00 
 
 Average. 
 
 $4,695.93 
 881.51 
 1 $7. 14 
 301.81 
 283.69 
 43.44 
 587.83 
 174.89 
 5,417.29 
 
 9,609.27 
 
 6, 749. 33 
 1,226.(19 
 
 Indicated*^^'^*"^ columns will not balance since the answers are given to each case for the number of stores 
 
 > Table IX. — Monthly salaries and labor. 
 
 Question. 
 
 Number 
 of stores. 
 
 High. 
 
 Low. 
 
 Average. 
 
 Manager 
 
 42 
 27 
 31 
 31 
 26 
 
 $250.00 
 
 125.00 
 
 150.00 
 
 90.00 
 
 55.00 
 
 $45.00 
 10.00 
 45.00 
 35.00 
 16.00 
 
 $106.00 
 6S.87 
 74.13 
 49.95 
 32.10 
 
 Bookkeeper 
 
 Head salesman 
 
 other salesmen 
 
 Saleswomen 
 
 
 Officers and directors usually receive the nominal sum of $1..'50 per meeting, except where thev are 
 actively engaged in the busmess, when they are paid a salary for managerial or accounting services. 
 
 It is believed that the salary and rent items for 32 and 23 stores, 
 respectively, are fairly trustworthy, the average salary roll being 
 about $400, and the average rental about $75 per month. Even these 
 items are not typical of the stores covered by the survey, on account 
 of the small proportion included. 
 
 The percentage of expense to net sales is not excessively high. It 
 ranges from 7 to 17, with an average of 11.7. This percentage is 
 for 33. of the stores, and is probably a much better showing than 
 would have been made had all the stores been able to contribute to 
 the data from which this percentage was calculated. In view of 
 the fact that some. of the managers stated it as their belief that it 
 cost somewhat more to run a cooperative than a privately owned 
 business, this percentage is surprisingly low. The Harvard investi- 
 gation of grocery stores found the lowest cost of operation to be 
 10.4 per cent of sales, the highest 25.2 per cent, and the common 
 percentage 16.5, as against the cooperative averages just quoted. 
 
 In considering this showing for the expense of operation, there 
 must be taken into account the average gross profit of 21 per cent for 
 
 A SUEVEY OF TYPICAL COOPERATIVE STORES. 
 
 23 
 
 the stores studied by Harvard as against 17.7 per cent for the 30 
 cooperative stores for which the gross profit could be calculated. 
 The circumstances under which this investigation was made did not 
 permit the investigator to go back of the accounting system in every 
 case to see whether the data upon which gross profits could be 
 estimated were sufficiently reliable. 
 
 For some of the stores not included in this percentage column 
 of gross profit, it was quite certain that the manager was working 
 in the dark, and did not actually know the amount of his gross 
 profit. For example, in several cases a manager who handled prin- 
 cipally groceries and farm produce said that his gross profit was 
 about 21 per cent. Upon analyzing the statements, however, the 
 amount was found to be very much below what he estimated. This 
 was due to the fact that certain commodities, such as butter, eggs, 
 sugar, flour, and practically all farm produce was handled upon a 
 very close margin, and sometimes at an actual loss. These items 
 bulked much more largely in the total business than the manager 
 realized. One store, for example, went bankrupt within a period 
 of 10 months because its manager thought he was running upon an 
 average of 20 per cent gross profit, while in reality he was running 
 at a net loss of 7 per cent on sales, and his gross profit was only a 
 little over 10 per cent. 
 
 Referring once more to Table X, we find that the average cost of 
 all salaries and labor amounted to a total of 6.4 per cent of the net 
 sales as compared with 11.7 per cent for the total expense. That is, 
 the salaries and labor form 54.7 pef cent of the total expense of 
 running the business. This surely is not excessive. The Harvard 
 survey of grocery stores disclosed the fact that the salaries in the 
 average retail grocery under private management were 60.6 per 
 cent of the total expense, or almost 6 per cent higher. This is borne 
 out by Table IX, which summarizes the results of the investigation 
 of wages paid. For 42 stores the average salary paid the manager 
 was $106 per month. But if 6 of the stores which pay their manager 
 $150 per month or over are eliminated, the average for the other 36 
 amounts to only $79.50. The average salary for the bookeeper was 
 also too low to secure efficiency. The 10 States in which these stores 
 are located have average wages considerably higher than the average 
 would be for the country as a whole; from this it is seen that the 
 wages paid by the cooperative stores are very low. 
 
 In addition to the regular salaries and wages indicated in Table X 
 there are insignificant outlays for officers and directors, and often for 
 an occasional helper. The most common policy is for associations 
 to pay their directors $1.50 for each meeting attended, except where 
 they occupy a position in the business on regular salary. Occasional 
 lielp costs the daily wage of from $1 to $2.50 a day, with an average 
 
 I 
 
24 
 
 BULLETIN 394, U. S. DEPARTMENT OF AGRICULTURE. 
 
 A SURVEY OF TYPICAL COOPERATIVE STORES. 
 
 25 
 
 
 
 
 
 of about $2 per day. The proportion which these items bear to the 
 total wages paid is not very significant and has been included in the 
 labor percentage column in Table X. 
 
 In addition to their regular wages, the cooperative laws of some 
 States stipulate that employees shall receive dividends on the amount 
 they receive as wages, just as members receive dividends on purchases. 
 As a matter of fact, however, this principle of dividends and bonuses 
 to employees is generally ignored, and some stores even go so far 
 as to stipuhite in their by-laws that no employee shall receive any 
 reduction on purchases. Employees in such stores must become meni- 
 bers in order to participate in dividends. Among the stores visited 
 during the survey only 2 were found which actually had distributed 
 dividends on wages. 
 
 Table X. — Important percentages based on sales. 
 
 St<>re No. 
 
 Sales. 
 
 1 §623,703 
 
 2 R32,0(jO 
 
 3 200,000 
 
 4 177,546 
 
 .■> 174,997 
 
 6 168,546 
 
 7 143,000 
 
 tt ! 96,000 
 
 12 
 
 13 
 
 Ex- 
 pense. 
 
 95,916 
 87,009 
 69,000 
 68,000 
 
 14 1 67,074 
 
 15 j 65,708 
 
 16 1 65, 152 
 
 17 j 63,978 
 
 18 60,000 
 
 19 
 
 20. 
 
 21. 
 
 22. 
 
 23. 
 
 24. 
 
 25. 
 
 26. 
 
 27. 
 
 28. 
 
 29. 
 
 30. 
 
 31. 
 
 32. 
 
 33. 
 
 34. 
 
 35. 
 
 Average. 
 
 60,000 
 50.000 
 44.000 
 44,000 
 42,000 
 41,000 
 40,000 
 40,000 
 40,000 
 38,000 
 36,413 
 34,804 
 22,000 
 20,000 
 20,000 
 19,000 
 7,500 
 
 $86,5.54 
 
 10. 221 
 
 24,915 
 
 24.904 
 
 23,037 
 
 16,115 
 
 11,522 
 
 14.941 
 
 12,558 
 
 13,325 
 
 7,285 
 
 6,840 
 
 10,114 
 
 8, 104 
 
 6,445 
 
 6,719 
 
 6,938 
 
 5,404 
 
 5,037 
 
 5,512 
 
 5,332 
 
 4,964 
 
 6,097 
 
 4,167 
 
 4,620 
 
 5, 109 
 
 4,000 
 
 5,949 
 
 Per 
 cent. 
 
 3,086 
 3,730 
 
 3,249 
 
 2,957 
 
 946 
 
 13.8 
 7.0 
 12.4 
 14.9 
 13.1 
 9.6 
 8.0 
 11.5 
 13.0 
 13.9 
 8.3 
 9.9 
 14.9 
 12.2 
 9.7 
 10.2 
 10.8 
 9.0 
 8.3 
 9.8 
 12.1 
 11.3 
 14.5 
 10.1 
 11.5 
 12.9 
 10.0 
 15.5 
 
 Salary 
 
 and 
 
 labor. 
 
 $11,201 
 
 Per 
 
 cent. 
 
 Net 
 
 profit. 
 
 Per 
 cent. 
 
 5.0 
 
 12,022 
 10, 193 
 9,000 
 7,801 
 6,472 
 6,440 
 
 *4,"9S6" 
 «,075 
 4,909 
 
 8.8 
 17.0 
 
 3,982 
 4,359 
 2,685 
 3,800 
 3,563 
 2,858 
 3,080 
 3,900 
 3,015 
 3,300 
 3,246 
 
 7.0 
 5.5 
 6.3 
 6.0 
 6.8 
 6.7 
 
 "7.'2' 
 9.0 
 7.3 
 
 16.2 
 15.5 
 12.6 
 
 11.7 
 
 3,357 
 2,752 
 1,772 
 1,900 
 
 1,976 
 
 1,620 
 
 720 
 
 6.1 
 
 6.9 
 4.6 
 6.3 
 6.4 
 6.3 
 7.0 
 9.4 
 7.4 
 8.2 
 8.0 
 
 8.8 
 7.7 
 5.2 
 8.6 
 
 9.8 
 8.5 
 9.5 
 
 6.4 
 
 Sl)«).282 
 10,050 
 6.375 
 8,712 
 4,377 
 17, VJ2 
 9,927 
 9,313 
 5,170 
 
 9,763 
 
 648 
 
 > 753 
 
 2,6t6 
 
 4,424 
 
 3,775 
 
 1,453 
 
 P28 
 
 2.774 
 
 1,032 
 
 3.2';9 
 
 536 
 
 1,310 
 
 1,245 
 
 783 
 
 400 
 
 1,701 
 
 1,027 
 460 
 
 10.6 
 4.3 
 3.1 
 4.9 
 2.5 
 
 10.2 
 6.9 
 7.2 
 5.4 
 
 Per 
 
 cent 
 
 pross 
 
 profit. 
 
 11. 
 
 I i. 
 4. 
 6. 
 5. 
 
 2 
 9 
 1 
 
 7 
 8 
 2.2 
 1.6 
 
 138 
 '302' 
 
 3.0 
 2.0 
 1.0 
 4.2 
 
 3.0 
 2.1 
 
 0.7 
 
 'i'.s 
 
 6.0 
 
 24.4 
 11.3 
 15.5 
 18.9 
 15.6 
 19.6 
 14.9 
 18.7 
 18.4 
 
 'i8.'4' 
 10.8 
 13.8 
 16.2 
 14.9 
 16.0 
 13.0 
 10.5 
 12.9 
 17.0 
 19.5 
 12.5 
 17.6 
 13.1 
 13.5 
 13.9 
 14.2 
 
 11.8 
 19.1 
 
 Inven- 
 tory. 
 
 Stock 
 
 turns 
 
 per 
 
 year. 
 
 198.460 
 30,477 
 61,952 
 67,588 
 24, 104 
 42,600 
 40,007 
 30,781 
 11, 169 
 
 6.3 
 7.3 
 3 8 
 2.5 
 7.3 
 3.8 
 3.5 
 4.2 
 8.6 
 
 16.9 
 ■i7."4 
 
 9,924 
 
 8.8 
 
 31.071 
 
 2.2 
 
 11,850 
 
 5.7 
 
 19.075 
 
 3.5 
 
 4,060 
 
 16.1 
 
 18,413 
 
 3.5 
 
 19,141 
 
 3.3 
 
 14,503 
 
 4.1 
 
 18, 161 
 
 3.3 
 
 16,122 
 
 3.4 
 
 15,587 
 
 2.8 
 
 8,799 
 
 6.0 
 
 18,278 
 
 2.3 
 
 11,004 
 
 3.7 
 
 7,249 
 
 5.5 
 
 9,300 
 
 4.3 
 
 9,158 
 
 4.3 
 
 12,816 
 
 2 9 
 
 9,171 
 
 3 9 
 
 7,495 
 
 4.7 
 
 6,733 
 
 3.3 
 
 8.341 
 
 2.4 
 
 8,813 
 
 2.3 
 
 8,999 
 
 2.1 
 
 1,731 
 
 4.4 
 
 17.7 
 
 4.4 
 
 > Loss. 
 
 The directors of one of the most progressive of the stores have 
 made the provision that when profits reach a certain figure em- 
 ployees are made participants in the increase. This is in the form 
 of a bonus, the payment and amount of which is left to the discre- 
 tion of the board of directors. 
 
 As has already been noted in the introductory section, the results 
 summarized in Table X can not be considered conclusive. In the 
 first place, the number of stores having accurate records is too small. 
 Again, the great variety of method in keeping the records makes it 
 impossible to classify the data accurately. Finally, although most of 
 the 30 stores from which the best records were obtained are of the 
 general-merchandise type, the number of departments and the 
 amount of business done in each varies greatly throughout the list. 
 The rate of profit as well as the expense of handling varies for each 
 kind of goods, such as groceries and provisions, dry goods, boots 
 and shoes, drugs, hardware, and implements. Accurate comparison 
 of operating expenses would necessitate separate sets of records* for 
 each of these different lines, but since expenses are not segregated, it 
 follows that a comparison of operating expenses does not give an 
 accurate index of the efficiency of the management. 
 
 However, the table does indicate that it is possible to make a sav- 
 ing through cooperative stores. It indicates also, to some extent, 
 the conditions under which a saving is possible. There are tT^o fac- 
 tors entering into the determination of the net profit. The first is 
 the percentage of gross profit made on sales and the second is the 
 percentage which the expense bears to sales. TKe table indicates 
 the relationship which must exist between these percentages if a 
 saving is to be made which will justify the existence of a cooperative 
 store. The careful manager should never delude himself by vague 
 generalities, but must take into account every single factor in his 
 business bearing on both the gross profit and the expense. Only 
 by constant checking on both of these factors can he be certain of 
 permanent success. 
 
 Table XI. — Summary of preceding tables. 
 
 Average number of members (43 stores) 228 
 
 Total resources (46 stores) $1,695,759.17 
 
 Total liabilities (46 stores) $514,672.61 
 
 Total paid-up capital (50 stores) $asi, 377. 98 
 
 Average resources (46 stores) $36,854.33 
 
 Average liabilities (46 stores) ^ $11,188.54 
 
 Average paid-up capital (.50 stores) _i $16,627.56 
 
 Average net worth (46 stores) _ $25,675.79 
 
 Average surplus, undivided profits, and unpaid dividends (46 
 
 stores) $9, 728. 12 
 
 Average per cent membership trade (42 stores) per cent— 60 
 
 Average per cent credit sales (36 stores) do 50 
 
 Average rate of interest paid on borrowed capital (37 stores) 
 
 per cent 7 
 
 Average per cent active members (37 stores) per cent__ 80 
 
 Average annual sales (45 stores) $87,781.91 
 
 Average gross profit on sales (29 stores) per cent__ • 17.7 
 
 M 
 
 t 
 
 M 
 
 ^i 
 
 m 
 
 ^. 
 
 it 
 
26 
 
 
 
 ^ 
 
 
 \h 
 
 BULLETIN 3&4, U. S. DEPARTMENT OP AGRICULTUBE. 
 
 A SUEVEY OP TYPICAL COOPEEATTVE STORES. 
 
 27 
 
 Average rate of operating expenses on sales ( 33 stores ) ..per cent. 
 
 Average produce bought (estimated) (22 stores) 
 
 Average annual cost of audit (15 stores) "___] 
 
 Manager's average monthly salary (42 stores) ~_[ 
 
 Salesmen's average monthly salary (31 stores) [ 
 
 Saleswomen's average monthly salary (26 stores) 
 
 11.7 
 
 $12, 126. 08 
 
 $56. 00 
 
 $106.00 
 
 $50.00 
 
 $32.00 
 
 OBSERVATIONS AND CONCLUSIONS. 
 
 The figures collected in this survey bring the conclusion that the 
 majority of the cooperative stores established are unsuccessful in . 
 achieving their main object— saving on purchases to members and 
 a reduction of the high cost of living. This conclusion is borne out 
 by the supplementary notes collected from managers who could not 
 apply statistics, and by notes on interviews with leaders who are 
 acquainted with the store movement in whole sections which could 
 not be covered in detail. But that there is one real service which 
 the cooperative stores have performed seems to have been demon- 
 strated again and again. Even in cases where stores have failed 
 absolutely and gone into bankruptcy, they have frequently been 
 responsible for the introduction of improved business methods in 
 the towns where they were established. They have had the effect 
 of stimulating competition. In cases where the merchants have 
 competed keenly against the cooperative store, they have been com- 
 pelled to adopt more efficient business methods. This has resulted 
 in lower prices to every consumer in the locality and frequently in 
 better prices to farmers on produce. 
 
 In the case of one particular farmers' store, it was estimated that 
 the farmers of the locality received an increase on their butter, eggs, 
 and poultry in one year which would have amounted to more than 
 the entire paid-in capital stock of the cooperative store. This gain 
 went to every farmer in the community regardless of whether or 
 not he was a member of the cooperative association. 
 
 Table XII. — General comments. 
 
 Is the business in satisfactory con- 
 dition (manager's opinion) 32 yes; 15 fair; 1 no. 
 
 Has the business been reorganized 6 yes ; 37 no. 
 
 Expansion planned 12 yes; 30 no. 
 
 Educational propaganda 12 yes; 30 no. 
 
 Probable future (manager's opinion) ..Bright, 20; good, 11; fair, 3; doubtful, 
 
 12; not good, 3. 
 
 Cooperation with other merchants 8 yes; 33 no. 
 
 Are employees members? ___9 yes; 24 no. 
 
 How do expenses compare with private 
 business in town? 4 higher; 12 same; 11 lower. 
 
 The manager of one of the most successful of the stores included in 
 the survey expressed the conviction that the cooperative store is to 
 the business community what the governors are to the steam engine, 
 and that on account of its regulative influence there ought to be a 
 cooperative store in every town. The same manager was of the 
 opinion that it would be an equally undesirable condition to elimi- 
 nate privately owned business from any town. 
 
 In addition to whatever salutary influence the cooperative store 
 may have upon the business community, the survey shows that there 
 are possibilities in the cooperative store, if properly organized and 
 managed, for the accomplishment of important savings to members, 
 thus opening the way for a reduction of the high cost of living. This 
 leads to a summary of the conditions of success and the causes of 
 failure. 
 
 Briefly stated, the conditions of success may be summarized under 
 the headings ^ : (1) Leadership; (2) capable management ; (3) favor- 
 able environment; (4) adequate legal safeguards. 
 
 (1) Leadership. — In every case where a store was found to be a 
 conspicuous success, thatt success could be traced to the influence of 
 some conspicuous leader. The part which leadership plays in hold- 
 ing the membership of the association loyal to their store is not con- 
 fined to the organizer. The outstanding leader who has the ability 
 to round up the community must be supported by others who have 
 some talent for leadership. The manager himself must be " a good 
 mixer." In fact, in the most successful stores every clerk has been 
 chosen with a view to adding more enthusiasm and support to the 
 business. Leadership, to be permanently successful, must build up 
 an organization which will be self-supporting and self-perpetuating. 
 A mistake frequently made by the leader responsible for the estab- 
 lishment of a successful association is that he does not provide the 
 necessary organization which will enable it to perpetuate itself after 
 he has severed his connection. Where such is the case, the societv is 
 foredoomed to go to pieces as soon as the strong leader is removed. 
 Cohesion must ultimately rest on education, on loyalty to an institu- 
 tion, and on principle rather than on the blind following of a leader. 
 
 (2) Capable management. — After all that has been said, little need 
 be added in support of capable management as an essential condition 
 for the success of the cooperative store. It should always be remem- 
 bered that business efficiency is as essential in the cooperative as in 
 any other type of business organization. Unfortunately for the 
 movement, the average enthusiast who feels a call to promote the 
 cooperative movement has in the past laid more stress on sentiment 
 
 * Compare with the rules adopted by the Rochdale pioneers in 1844 and the causes of 
 failure of cooperative stores as given in : Wisconsin State Board of Public Affairs. Report 
 upon Cooperation and Marketing, 1912, pp. 29, 34. 
 
 .«■ 
 
 
 M 
 
28 
 
 
 
 BULLETIN 3^, U. 8. DEPARTMENT OF AGRICULTURE. 
 
 than on business efficiency. This type of promotion is usually fol- 
 lowed hy a policy which soon brings the business to a disastrous end. 
 (3) Favorable environrmnt—ln several communities in which 
 successful cooperative stores were found, investigation revealed that 
 tliere had previously existed some natural bond of union, which in 
 Itself was an important factor in determining the welfare of the 
 business. Of these may be mentioned predominating nationality 
 common occupation, church affiliation, and fraternal organization' 
 Ihe existence of such communities may be taken as a good omen 
 for the success of any kind of business organization on the coopera- 
 tive plan. * 
 
 (4) Adequate legal safeguards.— X cooperative association, even 
 more than a corporation, requires a legal standing which will secure 
 safety. Every cooperative association is intended to be a sort of 
 pubhc-service institution, and, as such, it should have the legal safe- 
 guards which some States have provided by recently passed cooper- 
 ative laws. In one of these laws, a survey of the locality is stron^rly 
 recommended before an organization is effected. The same law *^re- 
 quires financial statements to be sent twice a year to an official 
 charged with the duty of protecting members of cooperative asso- 
 ciations. 
 
 The causes of failure, it is evident, are largely the opposite of those 
 conditions which make for success. The converse of the foregoing 
 four conditions of success would be: (1) Lack of leadership- (2) 
 poor management; (3) unfavorable environment: and (4) lack of 
 proper legal safeguards. 
 
 (1) Lack of leadership.— Frequently an outside leader comes into 
 the community and through his enthusiasm arouses the people to 
 a condition in which they are ready to enter upon the establishment 
 of a cooperative store. Then, after seeing the enterprise started, 
 he goes to other communities and leaves the association to work out 
 its own salvation. In many such communities the organization dies 
 from lack of interest as soon as the promoting spirit is gone. In 
 other cases, the leadership in a community may be of such an un- 
 practical character as to lead the association into attempting some- 
 thing which is actually impossible of realization. In such cases also 
 disaster is sure to follow. ' . ' 
 
 (2) Poor mmiageinent.— Let the management be ever so efficient 
 an association may still fall short of success if unpractical leaders' 
 lorce it into attempting the impossible. But even if it be presup- 
 posed that the business is adapted to the needs of the community 
 and every other condition favorable, it may still fail entirely through 
 bad management. Among the outstanding shortcomings of the in- 
 efficient manager have been noticed reckless buying, excessive exten- 
 
 A SURVEY OF TYPICAL COOPERATIVE STORES. 
 
 29 
 
 sion of credit, too great overhead expense, overexpansion, failure to 
 provide a surplus, no allowance for depreciation, inefficient business 
 practice and accounting methods, lack of proper auditing, and failure 
 to secure the support of wholesale houses because of scattered buying. 
 
 (3) Unfavorable environment. — Where a cooperative association 
 has been thrust into a community which is naturally divided against 
 itself through racial prejudice, interdenominational strife, excessive 
 individualism, or where there is insufficient business to pay the ex- 
 penses of a store, there can be little hope of success for the associa- 
 tion. 
 
 (4) Laxih of proper legal safeguards. — One cause of the failure 
 of man}' different types of cooperative associations is the lack of 
 proper legislation. Some of the stores organized in the early days 
 under corporation laws have had their stock centered in the hands 
 of a small body of members w ho have controlled the association in 
 their own interests, and have distributed among themselves whatever 
 surplus accrued as dividends upon capital stock. This means the 
 entire failure of the association from the cooperative standpoint. 
 On the other hand, cooperative laws have been passed by many States 
 that offer no adequate safeguards in the form of preliminary inves- 
 tigation and subsequent inspection. On account of the semipublic 
 nature of the cooperative business, it is believed that both of these 
 safeguards are essential to success. 
 
 1 
 
 

 m 
 
 It' 
 
 I 
 
 I •Si 
 
 lift* " 
 
 fev 
 
 
 •:k 
 
 APPENDIX. 
 
 Notes on the Payment of Trade Dividends. ' 
 
 I. Stores having paid dividends regularly out of profits (17) : 
 
 *1. Organized 1905. Had missed paying trade dividend only once in 
 10 years. 
 
 2. Organized 1908. 1909, 21 per cent ; 1910, 16 per cent ; 1911, 10 per 
 
 cent ; 1912, 10 per cent ; 1913, 8 per cent ; 1914, doubtful. One of 
 the mistakes of the first years was the payment of too large 
 dividends. 
 
 3. Organized 1912. Interest on stock iias been paid regularly. Divi- 
 
 deuds : 1911, 10 per cent ; 1912, 6 per cent ; 1913, 14 per cent ; 1914, 
 12 per cent. 
 
 4. Organized 1911. Seven per cent interest paid regularly. Divi<lends: 
 
 1911, $1,734.30; 1912, $8,140.52; 1913, $9,170.59; 1914, $9,914.30. 
 
 5. Orgaidzed 1912. Made large profit every year, and paid interest and 
 ^ trade dividends regularly. 
 
 a Organized 1904. Stock now worth $140. Has paid interest and divi- 
 dends regidarly. 
 
 7. Organized 1908. Dividends: 1911, 2 per cent; 1912, 2^ per cent; 1913. 
 
 3 per cent ; 1914, 3 per cent. Surplus, $4,339. 
 
 8. Organized 1890. Interest and dividends paid regularly for 25 years. 
 
 Total, $1,277,865.94. Range from 9 to 13 per cent on purchases, to 
 members ordy. 
 
 9. Organized 1889. Forty-nine semiannual dividends in 25 years; 3 
 
 per cent purchase dividend to all. Regular stock dividends' to 
 members only. 
 
 10. r)rganized 1893. Twenty-two years old. Trade dividend every year 
 
 from 3 to 5 per cent, members only ; $6,600 surplus and undivided 
 profits. 
 
 11. Had paid dividends regularly; 1913, 5 per cent; 1914, 6 per cent. 
 
 12. Organized 1912. Paid $2,300 dividend 1913; making good profit. 
 
 13. Organized 1897. Paid 12 per cent dividends and 6 per cent interest 
 
 in 1914 ; very successful. 
 
 14. Organized 1890. Except first year had paid dividends ranging from 
 
 6 to 10 per cent. 
 
 15. Organizefl 1918. Claims regular payment ; business seems prosperous; 
 
 no specific figures. 
 
 16. Paid 5 to 15 per cent dividend every year for 6 years; had largo 
 
 surplus. 
 
 17. Organized 1906. Trade dividends have been paid every year until 
 
 last year, 3 to 5 per cent. Had a very small surplus. 
 
 1 The numbers are not the same as In Table X. 
 
 A SUBVEY OF TYPICAL COOPERATIVE STORES. 
 
 31 
 
 IT. Stores having paid dividends irregularly out of profits (3) : 
 
 18. Paid dividemis 19(r3. 1904, 1905; surplus, $33,000. 
 
 19. Organized 1912. Auditor in 1914 advised not paying dividends be- 
 
 cause of large amount of subscribed capital uni)aid, although profit 
 was made. 
 
 20. Organized 1876. Originally paid dividends, but not since 1912. 
 
 III. Stores paying trade discount instead of dividends (3) : 
 
 21. Organized 1912. Discount of 5 per cent if account is paid in full 
 
 within 30 days. 
 
 22. Organized 1911. Discount of 5 per cent if account Is paid in full 
 
 within 30 days. 
 
 23. Discount of 5 j^er cent to members if account is i>aid in full within 
 
 30 days. 
 
 IV. Stores having paid dividends out of capital (7) : 
 
 24. Organized 1913. Paid 5 per cent in 1915 out of capital. Report shows 
 
 that in reality there was a deficit. 
 25.. Organized 1910. Only one dividend has been paid, in- 1911. Deficit, 
 $1,200, in 1914. 
 
 26. Organized 1913. Paid first year only. Suffered from overexpansion, 
 
 but is now in fair way to succeed. 
 
 27. Organized 1912. Dividends paid first two years out of capital ; deficit, 
 
 $5,000. 
 
 28. Organized 1912. Paid 6 per cent first year only ; present deficit, $5,000. 
 
 29. Organized 1903. Paid several large dividends out of capital ; now in 
 
 hands of receiver. 
 
 30. Organized 1903. Paid dividends regularly 1906 to 1912 out of capi- 
 
 tal. Failed to take into consideration bad debts and depreciation, 
 with resultant false showing. " One of the great mistakes of the 
 store." Surplus, $800. . 
 
 V. Stores paying only stock dividends (3) : 
 
 31. Organized 1876. Average 70 to 10 per cent annually on stock. 
 
 32. Average for last five years is 10 per cent to members. Xoue to non- 
 
 members. Now a regular stock company, but said to retain ** the 
 cooperative spirit." 
 
 33. Organized 1889. Now a regular stock company. Had failed to make 
 
 profit only one year. Stock now worth 500 per cent, because the 
 profits of five years were allowed to remain in the business. 
 Twenty yearly dividends on stock only have been paid, ranging 
 from 6 to 50 per cent. 
 
 VI. Stores having paid no dividends (14) ; 
 
 34. Organized 1913. No dividends imid "on account of disloyalty of 
 
 members." 
 
 35. Organized 1910. No dividends have been paid. In 1914 had a $4,(KK) 
 
 deficit. 
 
 36. Organized 1910. Neither interest nor dividends have been paid ; plan- 
 
 ning to reorganize as stock company. 
 
 37. Organized 1912. On verge of bankruptcy. 
 
 38. Organized 1914. Hopes to pay 6 per cent to members and 3 per cent 
 
 to nonmembers ; ver^, co^iservative management. 
 
 39. Organized 1912. No dfvi^aends'.pAifi,, '1 du^ to eicessive credit." Ex- 
 
 pect to pay onefn the nbar'fuituref "6 per c^nt interest paid on 
 capital. , . 
 
 30 
 
 * 1 • * • 
 
 • • < • • • « 
 
 » « ■ • 4 f • 
 
 • » . « • 
 
 .1 <. . , 
 
 
 ft-' 
 
 \t. 
 
M 
 
 Irfi- » 
 
 
 '4*. 
 
 
 32 BULLETIN 394, U. S. DEPARTMENT OF AGRICULTURE. 
 
 VT. Stores having paid uo ilivideud« — Continued. 
 
 40. Organized 1911. No dividend paid. "Victim of early mismanage- 
 
 ment," but now said to l)e on road to success. 
 
 41. Organized 1912. No dividends paid. Has a consideral^le deficit. 
 
 42. Organized 1877. No dividends or interest paid , bad management. 
 
 43. Organized 1909. Failed twice, due to mismanagement. No dividends 
 
 have been paid. 
 
 44. Organized 1912. No dividends; business in unsatisfactory condition. 
 
 45. Organized 1903. No dividends paid, due to excessive cretlit and loss 
 
 by fire. 
 
 46. Six years ago had large deficit. No <lividends. Is buiUling up sur- 
 
 plus now, and appears to be in prosperous condition. 
 
 47. Organized 1912. No reliable information, but appears to be in very 
 
 unsatisfactory condition. 
 
 o 
 
 M\ 
 
 ^1 
 
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END OF 
 TITLE