Financial Performance Profile and Evaluation of Alternative Equity Management Programs for Farmers Cooperative Equity Company
Andy Smarsh, Garden City, Kan., defended his thesis, “Financial Performance Profile and Evaluation of Alternative Equity Management Programs for Farmers Cooperative Equity Company,” Friday, December 11, 2009. Smarsh is a Retail Salesman with Helena Chemical in Cimarron, Kan. He graduated from Kansas State University in May 2010 with a Master’s in Agribusiness (MAB).
Farmers Cooperative Equity Company (FCE) was organized in 1919 with 54 charter members. Over the years, it has grown, made improvements and built new assets as needed to keep up with demand. With continued growth, it is important FCE determines the best way to manage equity investment capital from each patron-owner through an effective equity redemption program.
“My objective was to find out what has made the firm successful in the past and what they need to do to continue to be successful in the future,” Smarsh said. “I also wanted to know if there is a better business model than ‘business as usual.’”
Smarsh evaluated the financial structure of FCE and several possible equity management strategies to determine which method would provide the best results. After evaluating several alternatives, he found FCE may be able to return larger redemptions to patron owners by implementing an equity redemption strategy that adheres to strict balance sheet management. Balance sheet management would set solvency and liquidity goals for the cooperative. When those goals are met, the residual equity over and above those targets would be distributed as the equity redemption budget for that year.
David Barton, Professor of Agricultural Economics and Smarsh’s thesis advisor, said, “Andy’s thesis focused on one of the most important and difficult problems facing agricultural cooperatives: how to manage equity and the balance sheet of a business in a high-risk industry that is both sustainable and fair to producer-patron-owners.”
K-State’s Master of Agribusiness is an award-winning, distance-education degree program that focuses on food and agribusiness management. Students and alumni work in every sector of the food and agribusiness sector and are located in more than 35 states within the United States and in 25 countries.
“My research demonstrated what leads to high profitability of the cooperative and how the current equity management program can be improved by implementing balance sheet management principles and selecting a high-performing equity redemption program,” Smarsh said.
The full thesis publication can be found online on K-State’s Research Exchange at http://hdl.handle.net/2097/2389.