What term describes cooperative profits paid back to customers based on their purchases?

What term describes cooperative profits paid back to customers based on their purchases?

• A. Patronage refunds
• B. Dividends
• C. Interest income
• D. Capital gains

Answer: (A)

Patronage refunds are profits paid back to members based on how much they purchase from the cooperative. In a farmer-owned co-op, earnings from doing business with members are allocated to those members in proportion to their patronage, and they may be received as cash or as credits against future purchases. This concept is distinct from dividends, which go to stockholders of a corporation based on shares owned. Interest income comes from lending money or holding interest-bearing investments, not from member purchases. Capital gains come from selling assets for more than their cost, not from ongoing patronage.

Patronage refunds are profits paid back to members based on how much they purchase from the cooperative. In a farmer-owned co-op, earnings from doing business with members are allocated to those members in proportion to their patronage, and they may be received as cash or as credits against future purchases. This concept is distinct from dividends, which go to stockholders of a corporation based on shares owned. Interest income comes from lending money or holding interest-bearing investments, not from member purchases. Capital gains come from selling assets for more than their cost, not from ongoing patronage.