ANSWERS TO CORRESPONDENTS.

NZ Truth, Issue 818, 16 July 1921, Page 4

ANSWERS TO CORRESPONDENTS.

THE FARMERS' UNION TRADING CO. (AUCKLAND), LTD. ,

A leading country barrister has written to "Cambist" as follows: A client of mine has a few thousands -on deposit with the above, and has received 1 notice, that he cannot get it' at the earliest till after December 31 next. He has been getting six per cent, up to June' 14, * "when it fell due, "and will hereafter get seven per cent. I : have seen the company's balance-sheet. It shows among thei liabilities, fixed deposits £351,214 14s 7d. These, of course, bear interest, those at call at four per cent., arid . those for a year or more at six pcr 1 cent. At four per cent, the interest on £381,214- is Ji 15,248, and "at six per cent, it is £22,872 per annum. In the profit i and loss account the only item for^ interest is "interest on mortgages/ £8502 7s ' Bd." The' mortgages are given as £160,597, hence they bear interest at a little over five per cent. Where is the interest ■on the fixed deposits shown?' It is too big an item to be hidden m any item save salaries, £138,362. but it is scarcely likely to' be m that. Neither the ad-, vertising, - stationery and, printing account, nor the trade expenses ac-.. count would be large enough to hold' it- Again, if the flotation expenses and goodwill had been written off and not appeared as assets, the net profit for ihe year of £ 20,719 13s Id would have' turned into a minus quantity. Do, you think my client's anxiety fpr the safety of his money is without foundation? Tho point raised regarding the lack of information about the interest payable on the fixed deposits DID NOT ESCAPE % THE NOTICE of "Cambist" when he recently reviewed the balance-sheet of the above company. He, however, did not consider that the apparent omission of the charge from the profit and loss account mattered anything. There are two items that the legal gentleman makes no mention* of m the profit and loss account, that could easily hold the sums which he suggests the interest amounts to. In the credits of "gross profits. Auckland- warehouse, £127,830," and "profit transferred from branches and factories, £90,---•855," such sums Gould be deducted, and so obscure the charge. . Then, again, the whole of this money could be credited to the' amount, ."credit current accounts, £151,482," and the contra could be worked- out spread over the assets side of the balancesheet. The company shows assets totalling £1,378.676, and the income from profits, £218,686, so that the interest on deposits bears a very small proportion to either of these lastmentioned sums. "Cambist" is constantly finding fault with the set,. out. of profit and loss accounts connected with joint stock companies. He must candidly, admit that he does not consider that this concern is without blame m these respects. By hiding charges such as interest on fixed- deposits, 'm his opinion, grave deductions are possible when made by persons who are not rxpert mercantile or financial accountants. "Cambist" is too experienced m matters of bal-ance-sheets to allow . himself to be committed to vouch for the placement of this interest item.- What has been set down abov '-'- .pure speculation on his part, feasible enough, no doubt, but not definite ei.ough to satisfy any seeker after facts, or himself either. In answer to the question, "Do you think my client's anxiety for the safety of his money is without foundation?" "Cambist" replies that he does so think and, what is more, he fully believes that when the bond Issue of £250,000 is oversubscribed, as he believes it will shortly be. this company will have plenty of loose cash with wliich to settle up with all of its depositors. In 'addition to this there. Is the' large sum of melting assetsstocks of all sorts amounting to over £673,051 — which even now if bringing m daily a fluid stream of BOTH CASH "ON THE NAIL, and cash payable at the end of each month. It will be seen from the fore- . goinsy that practically one-half of the ' £1,378,076 assets of this company are m a liquid state, for the stuff is there to make it so, while the turnover (£1,484,513) for the past year assures air creditors that the business, will soon get upon an even balance m the financial department. With the stocks to melt (£673,051). and the new money coming m from the bond issue .'say, £250,000)' there will soon be close upon a million pounds available, and/ with such a sum to work upon the company should sail easily over the temporary squall which has struck the Dominion.* The client mentioned by the barrister, whose letter is quoteo here is a lucky man $o have his money cared for him at seven per centper annum. In the meantime ho need ■pot worry anymore than the bank wll'ioh has lent this company of farmers over £79,000 at the date of the/ balance-sheet- . "Script": When a little company of this kind allows the secretary's salary to be m arrears for "the past fifteen months." ns lhe circular says, and has other liabilities amounting to £290,

which it cannot meet, the end appears to be very close. 'Cambist knows nothing about the patent rights, , and is therefore unable to advise you whether to take up the debentures or not The question cannot be answered fully by this writer. On the face of things, he is inclined to the belief that you need not take up any of these debentures and also that if the company cannot float the issue it will go into liquidation. In the latter event, shareholders will probably be sorry they were so foolish as-- to put gooff money into such a concern.