FROZEN MEAT CO.'S BALANCESHEET.

Southland Times, Issue 17653, 10 February 1916, Page 2

FROZEN MEAT CO.'S BALANCESHEET.

THE RESERVE ACCOUNTS. To the Editor. Sir, —In reply to Mr J. E. Watson’s letter of Stli inst. in your issue of to-day, ho states I maintain that the whole of any company's reserves of undivided profits should be invested outside of the business. I did nothing of the sort. What 1 did imply, do imply, and will imply to my dying day, is that the built of the HU5,239 shown on the debtor side of the balance-sheet as reserves should not be so called, because the effect or result might, and in many cases would, cause the shareholders and investing public (who have not had the same experience as myself and others in business in sifting balance-sheets) to be misled into thinking that there actually is a sum of this kind in gilt-edged securities available in times of trouble. The proper name to give the bulk of this large sum is “additions and extensions in land, buildings, plant, machinery, etc., for further development of the company s business.” Had this been done I could not have complained, except to say that it seems to me a pity that a company like this doing a large business and making good profits for many years, has still practically no reserve fund outside of its own trade, though it has been in business for nearly 33 years.

I do not know why Mr Watson will persist in bringing in the name of The Nightcaps Coal Company, Ltd. (he frequently did so 10 years ago), which I do happen to run in conjunction with others, because it has nothing to do with my general principle, which applies to all trading companies, but I will say this, that had I held a similar position in the Frozen Moat Company, it would have been only my duty to the shareholders and the investing public to have had a substantial reserve fund by this time —outside of the business —unless good reason could be shown that it was impossible. Air Watson goes on to illustrate his arguments by quoting leading banking, shipping, insurance, and mercantile companies, and fortunately for me the Bank of Australasia, which he truly says is one of the soundest and most conservative Institutions, and which he states employs over four-fifths of its reserve in its own business.

1 have before me now its balance-sheet made up to 12th April, 1915, showing liquid assets of specie, bullion, Government notes, cash balances, loans at call on short notice. British and Indian Government securities, and others not detailed, in all nearly £9,000,000. surely ample. In addition, they value as an asset the whole of their bank premises in Australia, New Zealand, and London at only £20,333 S/SP (the Tay street building and ground alone should be worth half this sum) though their actual value is estimated in good time like the present, at £1,250,000. I think it is about 12 or 13 years ago since I first criticised the Frozen Aleat Company’s balance-sheet, and took exception to the sums stated as reserves on the debtor side being called such. Now all along that has been, is, and will be. my sole contention, and is the crux of the whole correspondence for the reasons given. And I- am not going to budge one iota from it now or hereafter, and I do so solely in the public interest and without animus to anyone. As Mr Watson is a Lieut.-Colonel in the N.Z. Army (T was an efficient private in the Home Artillery Volunteers when he was in shorts) 1 could illustrate by analogy the duties of a Reserve Army in a battle towards the fighting army, the point of which he will see. —I am, etc., WILLIAM HANDYSIDE.