The Telegraph-courier. [volume] (Kenosha, Wis.) 1888-1946, 1920-04-01
tBy Geo. prake smithl


So much has been said about financ-
ing business, but in language not un-
derstood by the layman who is not
familiar with corporations and corpora
/ ton stock issues, that the intention
of this little article is to try, if pos
sible, to state in plain everyday Ian
guage the principles involved in the
starting of business and in financing
it, not only at the start but for its
growth as it expands.
Where Does the Money Go?
This question was asked me recently
by gentleman who thought it strange
that a large corporation that | have
/ been interested in should need to sell
securities for it's business purposes;
and the questioner couldn't seem to
understand that, while the business of
large corporation was constantly in
ereasing and growing and large profits
being made, it needed more money,
and promised the gentleman that l
would, in short time, write an article
giving nay views on the subject of this
paper and send him a copy. So let's
begin this article under the first cap
ton of:
Starting a Business.
We will say that four of us had
concluded that we would 60 into the
manufacturing business of desks or
brass goods, or any other kind Of com
modify in general use. The first ques-
ton that arises would be the amount of
capital needed to start such a business
and put it on its feet and be perfectly
safe at all times. We figured the cost
of the plant, the machinery necessary,
the amount of money needed for adver-
Using and working capital to conduct
the business with. We concluded that
we needed 100000, so each of the four
put in $4,000 and had a company in
corporated for double the amount of
stock that we had paid for, putting
100000 of the stock in the treasury
of the company.
Risks and Profits.
1t will be seen from the above plan
that all the risk of the business, OF
its future success and profits, is
taken by those who start the business;
consequently they issue to themselves
common stock, as this is a close cor
poration so far and more like a part
nership of four than taking in the
general public. Under the circum-
stances the four take all the risk and
on the start have all the profits.
History of First Years Business.
We have built our factory, put in our
machinery and stocked up with the
necessary materials, and have begun
to turn out the product. We sent out
statesmen on the road to make contracts
for the sale of our merchandise. Hav-
ing laid all plans in good shape, first
to make a good product; second, to
represent it in a fair, square and
straightforward manner to the public
we found splendid sale for our pro-
duct and FOG the first year sold every
thing that we could make and deliver.
Business Ahead of Our Capital.
We have had a good year and after
inventory find that we have made even
more money than we anticipated and,
of course, everybody is happy. But
on examining our accounts, while we
have made $4,000 clear in the business
we find we have not much cash on
hand and the question ari- IS: Where
is it? What has become Of it? We
have drawn moderate salaries, con-
Quoted the business economically and,
as stated above, made money; but
where is it? After a careful analysis
we find that we have on hand larger
amount of materials than we figured
when we started business, this in or
der to be prepared for vastly increas-
ing business. We find we have on our
books debts that are largely in ex-
cess of what we had expected and we
naturally say to ourselves, "This bust
ness can use more cash. In fact, to
go on as we are, doubling this business,
we must have more cash, and we find
that we have to borrow some money
from the bank in order to keep pace
with the demands of the business.
This, however, is not sufficient, as we