COMPANY BALANCE SHEETS.

Otago Daily Times, Issue 19946, 13 November 1926, Page 15

COMPANY BALANCE SHEETS.

MOSGIEL WOOLLEN FACTOEY COMPANY (LTD.). Paid-up Capital, 1902-23, £83,457; 1924-26, £95,380. Charges salaries Goods Net & working Uescrvcs. account, profit, expenses. *Divnd

* Including bonus. The fall that had been steadily taking place in the net profit since 1922 has been checked effectively during the past financial year, and most of the lost ground has been regained. The net profit of £22,064 com pares favourably with that of any preceding year, and coming, as it does, at a time when the woollen manufacturing trade is generally depressed, it is all the more wel- | come. Possibly it is on account of the existing conditions that the directors recommend a distribution of only 10 per cent, to the shareholders, out of a net return of 23.13 per cent. Reserve account receives an addition of £3OOO, and, after provision is made for depreciation and certain improvements in the buildings, there is a sum of £2526 to sweli the accumulated balances. The distribution includes a 2 per cent, bonus, and a further 1 per cent, would still have permitted a considerable increase to the amount carried forward. Three years ago when the profit was over £7OO less than that of 1925-26 shareholders received 11 per cent., but uncertainty regarding the future must necessarily influence the board's decisions at this time. The curtailment that took place in the expenditure has been followed by a rise. This is to a great extent the outcome of the larger profit with a correspondingly larger taxation allowance. Working expenses and factory ’ maintenance show an increase of some £l4oo—a movement that is proportional to the enhanced balance on goods account. The sales do not seem to have increased to any great extent if the item entered for discounts may be taken as a guide, while bad debts at £lOl make their appearance on this occasion The revenue is swollen by certain sundry receipts, among which is interest, formerly an item of expenditure. There is also an amount of £133 received from British Dyestuffs Corporation (Ltd.), but it is not apparent whether it represents the proceeds of a holding of shares in that company or some miscellaneous receipt. The total of the profit and loss account is overstated on each side by 10s according to the detailed amounts. The effect of the fire in the warehouse is observed in the balance sheet. There is a redistribution among the liquid assets, stock at £42,247 being reduced to nearly one-half of its figure of October, 1925, while it still stands as the largest individual unit. As the fire presumably affected merely the manufactured goods, and only a portion of them, it will be seen how large a part of the stock they represent. The sum of £40,000 lying on deposit has to be taken in conjunction with the stock. The results of the fire may not have had time tto make itself fully felt in the sales returns, and meanwhile money that would otherwise have been locked up in goods is producing revenue earlier than it would have done in its other form, but whether this will compensate for the depletion of stocks and the extra labour involved to replenish them remains to be seen. ...... . . i Book debts combined with bills receivable show a drop of over £4500. This reduction apparently has to some extent influenced the bank balame, which has altered by approximately £IO,OO0 —an overdraft of some £B2OO being succeided by a credit balance of £IBOO. Investments remain as before at £21,187, of which £IO,OOO is held for the employees’ benefit fund. The rest is employed in New Zealand Government loan, and from its figurs it seems to be entered at its purchase price instead of its nominal amount. Among the fixtures warehouse property re mains at £6OOO. A depreciation allowance seems uncalled-for hsre, and is not applied. The tendency of the property will rather be in the opposite direction, and its present figure must cover a secret reserve. ihe rest of the fixed assets are gradually diminishing under the operation of depreciation. In two years, the sum of £9OOO has been allowed under this heading, while the additions. consisting entirely of machinery, come to £2093 during the same period. The land, buildings (apart from the warehouse) and machinery aggregated £46,063, from which £SOOO has been written off, or nearly 11 per cent. The danger seems to be that the fixed assets may, through excessive writing down, run the ritk of being entirely obliterated as far as the balance sheet is concerned. , With the disappearance of the- bank overdraft, ths liabilities are less by one-third. Among the sundry creditors are discount off book debts and the special provision of £OOOO made tor improvements to the buildings. The latter is taken out of revenue, showing that the extensive depreciation allowance does not exhaust the company s resources, and, that when special expenditure of a capital nature is contemplated, it is forthcoming from revenue a a well. Employees' benefit fund is increasing gradually under the operation of interest. Reserves are atead.ly mounting. Apart from the transfer of £3OOO, they have been augmented by the laiger undivided surplus. The inroad made upon them a few years ao-o has now been all but made good, and they have reached £50,454. This money is mainly employed in the business, the investmant of £11,187 representing the part that is placed outside. With open reserves equivalent to 52.90 per cent, of the paid-up capital, and secret reserves of unknown quantity, this company can exhibit a balance sheet that for solidity will stand comparison •with any. THE WESTPORT COAL COMPANY (LTD.).

Ono point is clearly brought out by the above columns, and that is that the gross and net profits are not interdependent, ibe general expenses fluctuate consideraoly from year to year, and a larger gross profit does not necessarily produce a larger net profit. For 1925-26, the gross profit is up by some £7500 whereas the net is nearly £2OOO down on that of its predecessor. What - causes may have been at work to increase the disbursements by £9500 is not disclosed in the printed accounts, which do not err on the side of minuteness of detail. The net return works out at 10.38 per cent., out of which a dividend of 10 per cent, per annum is proposed, and with the transfer of £IOOO to Employees' Provident Fund, a sum of £707 remains to be carried forward A further 2J per cent, is provided by the insurance account, which on this, as on previous occasions, gives useful assistance. The output of coal during ths year has been steadily maintained, and a total , of 442 825 tons is the largest recorded during recent seasons. The cost in general expenses works out at Is 10.77 d psr ton an increase of over 4|d on that of the prior year, which, however, was exceptionally low. The’rates since 1920 work out as follow:

It looks as if, during the past two years, there has bsen some different method of apportioning the expenses from that of the years preceding, and that some items nave been taken out of general expenses and charged elsewhere. There is no indication as to what is responsible for the rise during 1925-26, which has had the effect of making the extra 13,000 tons or so of coal more expensive to raise. The extra revenue is produced almost entirely by the balance on coal account As certain allowances have been made before this balance is arrived at, and as their extent is net mentioned, it is not possible to compare the one season with the other. , The liabilities total to £386,840, divided between two headings. Approximately twothirds of this sum is opposite “sundry liabilities,” whatever they may be composed of. Apparently their composition is left to the imagination of the shareholder. It is important to know to what extent they represent actual indebtedness that has to be met—in some cases it may be claiming interest until settled—and how far they consist of reserves or provision against wastage. The other third is made up by insurance fund which, at £128,461, continues to mount steadily. As a factor in augmenting the dividend this fund plays an important part, producing £11,250, or one-fifth of the whole distribution It is not clear from what sources it is fed, but its increase ' of £IO,OOO gives a favourable rate of return on the amount placed in the fund. j Some additions have been made to pro

perty account which stands at £291,9 1 7-f. Mines, land, buildings, machinery, and plant are all included in the one item, and the value of all, except perhaps a part of the buildings and furnishings, _ are contingent upon the lifetime of the mines. It is not stated how fai the account hae been affected by the depreciation allowance, but the effect of tune upon each varies considerably, and makes the task of arriving at an equitable rate a difficult one. Against property has to be placed the sinking fund increased by £6OOO to £123,750 or, with interest added, to £187,866. The position of sinking fund to property has stood since 1918 as follows—viz.:—

The question arises as to what proportion of the property account sinking fund directly applies. The increase of the latter at this time is small when compared with the preceding two years—the result of larger capital expenditure The liquid section contains two-thirds of the total assets. Loans and investments have risen to £299,597, and are still the largest unit on this side. They must make a considerable contribution to the general revenue. It is not mentioned whether they appear at their market or their purchase price, and no indication being given of the nature of the loans and investments, it is impossible to tell if the fluctuation is likely to be large or small. Stocks at £30,263 have not varied much. Only a part of this amount apparently is represented by coal. Sundry debtors with bills receivable come to £84,965. This is higher than 12 months ago and is reflected in the bank balance which, although of solid dimensions, is less by nearly £II,OOO, There is enough in it, however, to meet the proposed distribution and leave something over. The money lent to workers in connection with their house purchase scheme is gradually being paid off, and is less than one-half of its figure of threa years ago Although the statement of accounts leaves much to be desired from the point of view of affording enlightenment, there is sufficient to show that, if given freedom from serious industrial disturbances, coal is still a profitable proposition in spite of competition from other and more modern power producers.

Oct6. £ £ £ £ p.c. 1902 19,568 19,580 6,288 7,146 7 1007 ... 17,242 14,596 5,093 6,119 4 1912 18,788 22,634 11,827 8,123 7 1915 20,577 25,932 12,936 8,644 7 1916 10,163 40,306 24,608 10,051 9 1917 ... 26,164 38,542 10,012 21,190 9 1918 ... 30,927 56,185 22,827 26,918 10 1919 ... 37,202 52,480 22,959 24,441 10 1920 ... 44,253 68,012 22,631 29,489 11 1921 ... 48,722 59,041 22,149 32,421 U 1922 ... 47,487 61,985 24,946 32,004 11 192.1 ... 52,125 57,032 21,319 30,430 11 1924 ... 44,358 43,353 18,693 19,163 10 1925 44,928 35,142 15,358 13,792 10 1926 ... 50,4154 44,543 22,064 17,334 10

Paid-up Capital, £450,000. in ’Mend cum. Gross. Net General bonus Profit. Profit. Expenses. p.O. 43,022 56,946 10 1919 99,872 10,863 59,009 91,872 36,230 55,641 1921 108,059 38,962 69,097 113,130 18,1-11 64.989 120,502 14,196 76,30*1 10 12* 1921 ... 01,417 81,205 27,701 48,693 63,716 32,512 192G 88,733 46,707 42,026 12Jt

Output. Tons. Chargee. £ Per ton. 1020.21 ... 326,380 60,007 4/2.81 1921-22 ... 435,601 04,989 2/11.SO 1922-23 ... 423,838 76,306 3/7.20 1023-21 ... 317,271 63,716 4/1.9S 1024-25 ... 420,684 32,512 1/6.16 1925-26 ... 442,825 42,026 1/10.77

Property. Total Sinking Fund. Eatio. £ £ p.c. 1919.19 ... 271,920 95,023 34.95 1919-20 ... 269,346 103,578 35.80 1920-21 ... 273.876 112,186 40.96 1921-23 ... 272.921 123,015 45.07 1922-23 ... 303.786 133.311 43.88 1923-24 ... 273,824 144,057 52.61 1924-2.) ... 260,004 175,405 62.62 1925-26 ... 291,974 1S7.SGG 64.34