RISKS OF CAPITAL

Evening Star, Issue 22032, 18 May 1935, Page 20

RISKS OF CAPITAL

THE PRINCIPLE OF PROFIT In an editorial article headed ' Full Recovery Dependent Upon Profits,’ tbe New Zealand * Accountants' Journal ’ discusses some of the popular fallacies on the question of profits in industry "The restoration of the profit motive is an essential to full recovery, and without it the most effective economic driving force is lacking,” the writer declares. “Not only would more men be placed in useful employment if industrialists and others could use the funds which are readily available for worth-while enterprises, but in many instances companies which now have large sums earning a _ low rate of interest on fixed deposit would release this frozen capital if they had some assurance of a fair return. . . ~ “ The fact that so many of our companies have been able to survive the effects of the slump is a tribute to the sound policies adopted in tho past in tho way of building up reserves and of meeting falling returns by a rapid adjustment of expenditure. In this connection members of the accountancy profession have played an important part in the way of inculcating amongst business leaders sound principles in finance and management. It is now necessary, however, to go further and instil into the minds of the public generally the need for cautious management and the necessity for the creation of reserve strength to meet contingencies in the future. It is also desirable" that tho man in the street should bo taught that if capital has to take a risk it has to he paid for that risk, and that unless a fair return is forthcoming business enterprise will be stifled. In many ways accountants can do much to bring about a better appreciation of just what capital means in the social fabric, and _ unless this is done the reckless theories of irresponsiblos with no stake in the country will ultimately wreck what has been built up over the last century.”