OUT OF THE DEPTHS

NZ Truth, Issue 1050, 7 January 1926, Page 3

OUT OF THE DEPTHS

Financial Reconstruction of Farmers' Co-op. A GREAT ACHIEVEMENT

(By "Fiat Lux.")

The New Zealand Farmers' Co-operative Distributing Coy., Ltd., which, m common with thousands of other trading organizations, appeared at the beginning of the slump m 1921 to be m an utterly hopeless position, has come through the past year with a profit of £5104This is an achievement of which the management and shareholders should indeed be proud.

"There is a tide m the affairs of men, which, taken at the flood, leads on to fortune." Thus does the general manager of this die-hard concern head an impassioned appeal to shareholders loyally to support their own organization. As the company for the first" time m years has shown a profit (for the twelve months ended September 30 last), it is highly probable that the advice he offers will be adopted by many, if not by all. This concern, which has entered upon its twenty-third year of business, has a paid up capital of £163,390, of which £25,575 has been contributed during the past two years, thus making clear m very definite and tangible form the shareholders' faith m the venture. It is to be hoped that all concerned will support the general manager's opinion that the time is ripe for the concern to move on again to enjoy better and more prosperous times, and will lend all that practical help and loyalty which alone would appear to be necessary for the realization of this object. Comparison Of Accounts A comparison of the accounts under review, with those for the year ended September 30, 1923, discloses some really fine achievements m financial reconstruction. One wonders m passing whether the vast bulk of the shareholders either understand or appreciate what has been achieved on their behalf. __ For instance, m 1923 liabilities, apart from paid up capital and mortgages, totalled £120,017. By 1925 this had been reduced to £70,996, and m addition mortgages had been reduced by £4771, making a total reduction of £53,792. This reduction, to the extent of £25,---575, was provided out of. new capital, and to the extent of £5074 out of net profits; the remaining £22,443 has been provided by careful realization of stocks, book debts and other floating assets. ■ Another interesting comparison is that of earnings and expenses for 1924 and 1925. The company's gross earnings m 1924 amounted to £52,119, whilst m

1925 they had increased by £3593 to £55,712. The buoyancy of the wool market and the consequent increase m commissions would perhaps account for a small per centage of this sum, but mainly the increase can be ascribed to the genuine extension of the company's business. Regarding expenses, it must be very gratifying to shareholders to find that fbp«e hay boen reduced m the two years by £6208. This has been achieved without m any way impairing the efficiency of the organization. . Debts incurred prior to 1922 and since proved to be bad have been written off during the current year. to the amount of £2632, and the management hold out the hope that this will be the last appropriation required under this heading-. Dealing with the balance sheet, the outstanding item calling for comment is the debit balance of the profit and loss appropriation account £65,637. Contrary To Practice The balance brought forward from last year was £72,340, but this amount has been reduced to the present figure by crediting premiums on shares (£6l), forfeited shares account (£1567), and net profit for year (£5074)). Now, transferring the two former items to the appropriation account, whilst not violating any law, is quite contrary to best practice 1 , but is perhaps excusable under the 'special circumstances. The proper procedure would have been to place both sums m a general reserve account, and from there bring them to bear when writing off lost capital. The chairman, m his address to shareholders at the annual meeting, indicated that the board did not intend to bring forward proposals for writing off accumulated losses out of -paid up capital until after the end of the next financial year, ending September 19.26. Perhaps this is a wise move; it is necessary to be reasonably sure that a concern is m a position to. pay dividends regularly before going to the trouble and expense of writing down capital.