Course On Financing N.Z. Business Begins

Press, Volume CI, Issue 29910, 25 August 1962, Page 13

Course On Financing N.Z. Business Begins

More than half the companies in New Zealand had been incorrectly capitalised at commencement, or after commencement, said Mr M. Y. Walls, senior lecturer in accountancy* at Victoria University. in* an address to a business study conference yesterday.

The conference, which had been arranged by the Adult Education Department of the University of Canterbury, is being attended by more than 150 qualified accountants and business executives. The subject is. financing New Zealand business today. Mr Walls said that the reasons were expediency; partly resulting from Government controls; ignoraetoe of such matters as basic rules of sound finance: economic and political considerations which affect the firm in the future and the need for new money; taxation effects and particular regulations: the best source for obtaining finance for specialist needs; inertia over optimism of prospects, and temptation through cheap bank loans. The effects of economic and political issues could scarcely be over-emphasised when considering any change in a firm’s affairs in New Zealand, a country which was among the most vulnerable trading countries in the world to the effects of slumps and booms in overseas markets, said Mr Walls.

Commenting on bank overdrafts as a form of finance. Mr Walls said an overdraft should never be so large as to cause the firm acute inconvenience if suddenlv called on to pay it He said It was virtually callable on demand and should it be called up suddenly, or drastically reduced, many companies would be in a very awkward position.

Mr Walls said that ready access to funds by no means solved the basic problem for New Zealand firms. The main gap was not necessarily capital. but management financial know-how.

Papers were given by Professor 'A. S. Carringtori, professor of accountancy at Canterbury University, and Professor T. K. Cowan, professor of accountancy at Otago University. Professor Carrington spoke on the evaluation of capital expenditure projects and return of capital. He directed attention to the special features involved in decisions relating to long-term expenditure and the need for a clear policy to be followed in investing capital Professor Cowan discussed Problems of depreciation and the replacement of assets He Questioned the existin’? taxation legislation on depreciation and explained the modern approach to fixing depreciation so as to align actual values with taxation values.