THE WORLD OF BUSINESS

NZ Truth, Issue 877, 16 September 1922, Page 3

THE WORLD OF BUSINESS

(By "CAMBIST")

■ ')■-,,' > ■ Iy • rt(T" " !"•;"!"■■■ ' THE "~ r WELLI NGTON '"" J FAR M E RS' MEAT AND MANUFACTURING CO., LTD. ... Fourteenth . Annual Report and ance-Sheet-That this concern has managed to keep upon its feet for, the past fourteen years with so slender a capital account is simply marvellous, but one glance at the balance-sheet explains the l-eal position of affairs. The fact, is that with a paltry authorised capital limit of only £120,000 and paid up capital of £90,423, the company had to incur huge (liabilities m the matter of borrowing money. Of course, .there is a "reserve fund," the amount of which is £45,000, but what of it? How was it built up? Adding the reserve fund and paid up capital together the sum is £135,423. At date of the balance-sheet now under notice, the total of 'assets, is £649,074, so that roughly . this company needed a half- million more funds to trade with. To fill the gap, the Bank of New Zealand stands m for an overdraft (secur" ed by debentures), £255,097, and other creditors, such as London agents' balances, £209,241, and deposits £34,---525, line up alongside of the bank. Now, from one t end of the country to the other, a cry has gone up against the banks that they are not lending enough money to the farmers, and that these institutions are CHARGING FAR TOO MUCH for the interest upon the loans granted to their clients. "Cambist' 1 considers that the banks are greatly to blame for the howil, and. that the gross ingratitude of the farming community should " teach these institutions to be more circumspect m their dealings with farmers, wool growers, etc. "Cambist" disagrees with the granting of this huge overdraft,, which only means locking up. money and making it tight. A question might well be put m Parliament . on this subject. Turning over to. the assets side of the balance-sheet, the freehold property at Taratahi carries a mortgage of £3893, and the' equity is shown as £20,031- Here, again, we get evidence of borrowing, though from the manroer m which.it is stated m the accounts it would be an easy matter to overlook the fact. Buildings, plant and machinery, less depreciation (£3000), is put down at £266,983. The sum set down for depreciation is very small, and appears insufficient for the purpose of either building up a secret reserve fund or for the actual 'possibilities of wear and tear. Unrealised consignments, £201,086, is a very large sum to be outstanding at this date. It does not cover the London agents' balances before-mention-ed by about £SOOO. The -whole position has • a "list to starboard," so to speak, and considerable trimming will have to be undertaken to set the ship on an even keel. New Zealand Government securities (at cost) £10,112, should be written down to market values. The profit and loss account is AN UNSATISFACTORY DOCUMENT.. It groups so many items together that the figure results cannot be obtained. Two things outstand- The first is the huge cost of administration and the big interest charges for borrowed moneys. The former runs into £6464 and the latter £27,024. The Interest charges tells that the company should at once obtain a quarter of a million of paid up capital at the earliest possible moment. The figures seem to make it plain that an 8 per cent, dividend could be paid upon such money, and that this dividend would circulate amongst the members of the company instead of ampngst the shareholders , of the bank. The sooner that this matter is attended to the sooner will matters be put upon a sound business basis. At present no one could claim such a position for the company. , This year a 6 per cent, dividend is to be paid to the shareholders. It is wonderful to find that the bank, th© company's largest creditor, allows such a distri--1 bution. Only £ 125 is left td' be carried over to next year's account.