HOADLEY, SON AND STEWART, LIMITED.

NZ Truth, Issue 692, 21 September 1918, Page 4

HOADLEY, SON AND STEWART, LIMITED.

Second Annual Report and Balancesheet. The directors' report issued to the shareholders gives no information to that body beyond the sum of profits to be distributed, amounting to £5695, including .what was left over from the first year's business. The dividend is to be* eight per cent., and £3000 is to be added to the reserve fund, which will bring that wonderful reserve up to £ 4000 — that is on paper. This company has a paper asset valued at £7183 for "goodwill" m its balancesheet, so that the chatter about a reserve fund seems like a weird financial joke. Regarding this item, goodwill, it is only £68 — less than m the first balance-sheet. From this "Cambist" concludes that there must be some occult reason for the difficulty of removing that item. On the face of things, it would seem that the goodwill was too highly priced, and that at the present time it is as hard to get rid of as \ A SHAKESPEARIAN BLOOD SPOT. At any rate, it will take some rubbing to efface it from the smart vendors', hands that were interested m the flotation of the company. In the opinion of this writer the whole amount of the so-called reserve fund, viz., £4000, should be written off the goodwill account, and if the company is able to continue making profits they should be applied to the extinguishment of the "asset" goodwill. Turning to the balance-sheet, the capital account shows an increase of £1772, which gives £25,561 as the amount paid up. The manner m which the company presents the capital account is not one which "Cambist" commends. "Cambist" would prefer a separate statement, showing how the •shareholding stood and the actual paid-up capital taken from that statement into the balance-sheet. The method adopted here is somewhat like the efforts of a schoolboy doing a lesson ln a school book-keeping class. Moreover, it is lacking m the clearness WHICH MODERN FINANCIAL CONCERNS put forth.. Sundry creditors, which includes fixed deposits' and amounts owing by the company on open account, give a total of £ 14,108. This total is £782 less than ,m the first balancesheet. A sum of £2812 is held for the income tax, which shows that the borrowing dodge* to pay for the war requires a vast amount of bolstering up, and that the tax-gatherer will have a busy time hunting round for the interest and sinking funds for the loans. The overdraft at the Bank of New South Wales totals £ 62,970, an increase of £8498 for, the year. Whether this is a good thing for Hawke's Bay or not "Cambist"' cannot say. v ; On the assets side, freehold land,' buildings and saleyards total £5185, an increase of £ 130. Plant and motorcars have increased by £281 to £1874. It takes a lot of motor-cars to do business m the Hawke's Bay region. Stock on hand is more by £2215 at £5727. There is nothing about these figures to cause any comment. At the price of all stocks nowadays, the sum set down looks moderate, and points to rather a small stock than otherwise. Sundry debtors have bounded forward by £12,963 to £92,150, and at the same time it is noticeable that there are no bills receivable m the accounts this year. Last year that item figured at £ 6546. The . question naturally arises as to whether all the bills receivable met with due honor, or have. they, or part of them, become merged m the sundry debtors' total? The total of these advances is nearly four times the amount of the paid-up capital, and the ■latter is clearly quite inadequate for the large operations the company is undertaking. Hence the ENORMOUS BANK OVERDRAFT. Looking at the position-in this practical .and cold-blooded fashion, it is no wonder that the profits for the year do not bulk any larger than the amount shown, namely, £4967. The wonder is that there are any. The overdraft and the deposits added together give a total of £71,310, which must cost a large sum. At any rate" the debits m the profit and loss account are more by £2503 at £10,931, and that surely *tells its own tale — borrowed money is expensive to do business on. Considering that the company is only m its second year, the eight per cent, dividend appears somewhat liberal. If "Cambist" had anything to do with that matter he would be more inclined to a five per cent, distribution, as he thinks s\ich a course more m keeping • with the general position of affairs. The profits are only £725 more this year, and give a total of £15,899, which again reminds one that there is nothing m the business extra alluring for the investors. As to the profit and loss account, its set out is quite worthless for the purposes of fair criticism. The principle of lumping matters into two totals is no good to anyone, shareholder or the public. . Looking at the credit side, such a wording as "commission, interest, and net profit on merchandise, £15,899," proves HOW MIXED THE CONCOCTION IS. . It is fair' to assume, that gross profits are given for the commission and interest, while the net profit is taken for the merchandise account. Had each item been furnished, one could better gauge the true position. It is to be hoped that the shareholders will question the directors on these matters m general meeting, and at the same time demand a proper profit and loss account m the future. If the shareholders omit to do this then "Cambist" hopes the directors themselves will see that sensible improvements are made. The company needs a much bigger capital, and this writer thinks a candid statement of its affairs would .go a long way towards establishing confidence m possible investors. The man who has money to invest is beginning to find out how valuable are facts. The time is past for implicit trust" in' book-keeping mysteries. There is nothing more mysterious than a profit and loss account with only two items, one for income and the other for outgo.