FINANCIAL ANALYSIS

The amount of information contained in a cooperative’s financial statements is voluminous,

spanning the cooperative’s internal operations, its relationship with the outside world, and its
relationship with its member/patrons. It is an accounting practice that cooperatives shall prepare
financial statements at least once a year. This financial statement reflects the minor and major
details the company went through in just one year.

To be useful, this information must be organized into an understandable, coherent, and

sufficiently limited set of data. Financial statement analysis can be beneficial in this respect
because it highlights a firm’s strengths and weaknesses.

Data from a cooperative’s financial statements reveal the company’s financial condition.
Examining the financial ratios and having the horizontal and vertical analysis provides
management, members, and creditors a glimpse of the cooperative’s strengths and weaknesses.
The value of a particular ratio compared with a target range of values indicates the firm’s
financial health, and also identifies potential problem areas. Analysis can also indicate areas of
mismanagement and potential danger.

Horizontal Analysis - Balance Sheet

FICCO’s Total Assets is increased by 18.11% (1,998,987,774) from 2016-2017. Majority of the
increase is caused by the 656,855,541 increase in Noncurrent Assets. The 78.95% of financial
asset at cost contributes most in the increase of noncurrent assets and total assets. Financial
Assets at cost refers to financial assets in the form of debt or equity securities which are not
quoted in an active market and are expected to be realized in cash within one year from the
reporting period.

Current Assets also increases by 14.49% (1,342,132,233) results from the changes in cash and
cash equivalents (16.31%), loans and other receivables (14.26%), and financial assets at fair
value through profit or loss (12.27%). This increase in cash and cash equivalents is mainly due to
the increased in cash in banks and short-term placements which earns interest at the respective
bank deposit rates. Loans and other receivables increase because of the drastic change in the
various types of loans that the Cooperative grants. Also, financial assets at fair value through
profit or loss increases because of the increase in the investments in shares of stock, mutual
funds, trust funds and unit investment trust funds which are publicly traded in an active market.
This fair value through profit or loss account refers to the financial assets with quoted price in
the form of debt or equity securities that are held for trading purposes.
On the other hand, Total Liabilities increased by 13.23% (803,653,853). This increase is mainly
caused by the significant increase of the total current liabilities. Current liabilities changes results
from the increase in deposit liabilities (13.96%), bills payable (33.77%), interest on share capital
and patronage refund payable (22.35%) and accounts and other payables (6.96%).

Non-current liabilities decreased by 53.05%. This decrease was largely affected by the decrease
in the retirement payable.
Moreover, Equity increases up to 24.10%. This is mainly because of the increase in the Share in
subsidiaries' reserves and net surplus/income for about 23.97%.

Vertical Analysis - Balance Sheet

81.37% of FICCO’s Assets are currents assets meaning, most of the company’s asset is
composed of current assets. The current assets are composed mainly of loans and receivables
having a percentage of 61.06%. This implies that FICCO has a great amount of outstanding
balance of loans granted to its members which are not yet due.

Other current assets such as cash and cash equivalents and financial assets at fair value through
profit or loss also increase from 15.01% and 5.82% in 2016 to 14.78% and 5.53% in 2017,
respectively. This means that the Cooperative has enough cash held to meet short-term cash
commitments and enough financial assets held for trading purposes.

On the other hand, 52.71% of FICCO’s Liabilities is mainly comprised of current liabilities
(52.71%). The major account that made a significant impact on the percentage of the current
liabilities is the deposit liabilities which are about 40.92%. This goes to show that there has been
an ample amount of deposits made by members that can be withdrawn at a given period.

Non-current asset which is composed of retirement payable decreases from 0.18% to 0.07%.
This implies that accumulated retirement benefit costs charged against the income of the
cooperative over the expected remaining working lives of participating qualified employees was
not that significant in the latter year.

Furthermore, Total Equity increases from 44.94% to 47.22%.% which is composed of

Members'/stockholders' equity (34.19%), Donations and grants (0.02%), Statutory Funds
(7.92%); Share in subsidiaries' reserves and net surplus/income (2.47%), and Equity attributable
to Non-controlling Interests (2.62%).
Horizontal Analysis – Income Statement

In the year 2017, FICCO’s revenue or the income that arises in the course of the ordinary
activities of the cooperative increases for about 18.56% due to the increase in the various
accounts namely, Interest income from loans (13.00%), Net insurance premiums (28.83%),
Service Fees (19.37%), Fines, penalties and surcharges (2.65%), Funeral care and memorial
services (13.31%).

Interest on deposit liabilities and net insurance benefits and claims increase for about 18.24%
and 28.68%, respectively. This change leads to the increase of the total expenses related to
borrowings of funds used for operations or the financing cost (23.77%). Additionally, interest
income which refers to income earned and collected by the cooperative from the interest charged
on the loans granted to their members decrease by 21.22%. Though it decreases, overall
financing cost still increase.

Probable losses on loans and receivables also decrease by 27.62%. This decrease implies that the
allocation or provision for estimated losses arising from probable uncollectible loans/accounts/
installment receivables have been decreasing.

The institution has also gained a lot from Other Income especially in interest income
income/interest from investments/deposits which increases to 68.95%. Rent, membership fees
and miscellaneous income also contributed to the increase of the Other Income account.

Vertical Analysis – Income Statement

In 2017, FICCO’s financing cost is 24.75% of the total revenue which is greater compared to
cost incurred in 2016 which is only 23.71%. Though there is a slight difference, the increase is
still reasonable given that the cooperative has generated much greater revenue as of 2017.

Administrative costs decreases from 36.61% to 33.88% due to the decrease in the personnel
expenses, occupancy and equipment-related expenses, and operating expenses. This decrease in
expenses might goes to show that the cooperative is trying to increase its earnings.

Additionally, the provision for income tax decreases by 0.26% caused by the slight increase in
current income tax (0.09% to 0.18%) and in deferred income tax (-0.09% to 0.18%).
SWOT Analysis

Strengths
 FICCO as one of leading cooperatives in the country that engages in uplifting the
Standard of Living considered to be one of the Missions of First Community
Cooperative along with providing quality service and to uphold accountability. With a
primary purpose of the continuous building of its members, upgrading its officers,
management and operations, in which there is not much competition in the Market.
 The Cooperative is involved with a number of services it has to offer. Namely,
Issuance of Shares, Preferred Shares that earn dividends and Deposit services such as
Regular Saving Deposits and Time Deposits. They also offer different type of Loan
(Regular Loans, Agricultural Loans, Commercial Loans, Financing Loans, and
Personal Loans) and Insurance.
 A very established cooperative.
 Have many loyal customers.

Weaknesses
 The main risks that may arise from FICCO’s financial instruments are liquidity
risk, credit risk and market risk. FICCO’s exposure to liquidity risk is from the
cooperative’s possibility to have the inability to meet maturing debts or obtain
adequate funding. Credit risk is the risk that counterparty will not meet its
obligations under financial instrument or customer contract leading to a financial
loss.
 The Cooperative’s holding of cash exposes it to Credit Risk if the debtors are
unwilling or not able to fulfill their debts.
  Market Risk comprises the following risks Interest Rate Risks and Commodity
Price Risk. Financial Instruments affected by Market Risks include Receivables
and Bank or Loan Payables.

Opportunities
 FICCO should also consider branching out to other forms of banking such as
virtual and mobile banking.
 Potential to attract more membership because of its financial stability and god
customer services.
 Unsatisfied demands from the members/ customers from other cooperative.
 Aggressive marketing and publicity campaign of products and services.
Threat
 Government imposed policies and regulations which restricts the Cooperative’s
action.
 Change of policies and legal framework.
 Increasing poverty levels and inflation rate.
 High rate of member withdrawal.
 Lack of awareness, ignorance, and patronage among some members.