A study on financial performance of multipurpose cooperative unions of tigray region, Ethiopia

Performance measurement is defined as the process of quantifying efficiency and effectiveness. Effectiveness is compliance with customer requirements, and efficiency is how the organization’s resources are used to achieve customers’ satisfaction levels. Financial performance deals with measuring the results of the firm’s policies and operations in monetary terms. These results are reflected in the firm's return on investment, return on assets, value added, etc. The main purpose of this research is to study the financial performance of Multi-Purpose cooperative unions in Tigray Region. Eight unions are selected based on continuous auditing of the targeted unions’. The study considered three years’ auditing report with regard to quantitative data analysis using financial analysis tools, such as liquidity ratios, leverage, profitability ratio, trend analysis of balance sheet and income statement for the period of 2008 to 2011. The result of financial performance analysis illustrated that the financial position of the unions has not maintained satisfactory level of performance. The study results indicate that the borrowing power of the unions and the profitability of the unions are lower than the average. The Asset utilization of the unions is not satisfactory and the unions have to sale additional share capital and unproductive fixed asset to increase their own capital. To improve their efficiency and in order to gain enough profit the unions must decrease administrative and operating expenses.