The Washington times., 1922-08-09

- cooit eiNts . nASh iS'AtW "
the depression, as compared with
earlier panics. and says:
I'm spite OF the marked increase
IN both the number and liability Of
failures at the opening OF the pres
ent year. the, 1922 statements show
material Improvement over year
ago in most lines. Especially. is this
true with respect to the liquid
position, as shown by the current
ratio, or comparison of quick assets
with current liabilities As Is web
known, this test is. very frequently
employed by credit men. The cur.
rent ratio Is materially higher this
year than,iast, reflecting changes In
several other items In the statement.
Merchandise inventory had already
been written off to some extent IN
1920 to correspond with lower values 3
resulting from the drop in prices ex.
perienced in many lines during that
year. But, by and large, the jan
uary, 1921, statements showed con-
siderable inventory on hand. In
fact, in some lines II was greater in
point Of physical volume. even IL not
when measured In terms Of dollar
volume. than 1t had been at the
opening of 1920. In 1921 consider
able further. writing off occurred,
and. furthermore, stocks themselves
were considerably reduced.
This was a usual reaction from
The situation which had existed
when business reached its peak of
activity. Business houses at that
time had placed orders aggregating
several times their actual require.
rnents. and then found that the en-
tire quantity ordered was delivered.
As a result; -busines -mep have
eurtailed greatly The volume Of
their forward" orders, in. addition
10 keeping smaller stocks on hand.
In seasonal lines especially. whole
saiers and retailers have compelled
manufacturers to carry stocks Of
have ordered their own supplies
only from time 10. time. as needed.
At the same time that inventory
was written down. sales decreased
Cefiecting in part the ! lower price
level prevailingl while "payables"
remained at their fun amount. Ac-
cordingly,: the current position be-
came lower. At the present time,
koweverS stocks are much smaller,
and inventory has been pretty well
written off. Corresponding to this
decrease although somewhat less
In amount; there has been de.
crease In the volume Of accounts
and notes payable. As Inventory
has been. reduced. obligatio1s have
been repaid. The great=1dehrcase
came In 1921, and Is reflected in
the January, 1922, statements,
This decrease in payables, bow.
ever. has been much more largely
In the nature of reduction of in
debtedness of business houses to
banks than of business houses to
each other. Receivables show a
relatively smaller decrease than
do payables. This corresponds In
part to the smaller dollar volume
OF business, but also. reflects a
tagging in paying merchandise
creditors. The relatively greater
decrease in merchandise than In
payabies has resulted. in a decrease
In net worth. 90. Many firms showed
deficit from current operations dur
Ing the past two years, and the
surplus account suffered cor.
tespondingly. Since the opening
OF the present year, however. vol
urne OF business has increased, and
actual earnings generally are again
shown. - ...--
Stronger Position.
The above analysis indicates that
the financial position of business
houses is decidedly better rhan a
year ago. Inventory on the whole
has been written off sufficiently. II
also has moved from distributors
hands. 40 that stocks maintained
have been reduced considerably.
Trade obligations havenot yet shown
q corresponding decrease, but liqui'
dation OF Indebtedness to banks has
made great progress. Finally, the
bankers In general at present do not
need to make certain allowances
when considering the net worth
shown by the borrower, while profits
are taking the place Of previous
operating deficits.
This process of readjustment has
gone further in some industries than
In others. Some lines experienced
price decreases at an early date and
wrote off inventory correspondingly,
but in others, prices changed more
slowly and readtustment 10 the new
conditions was delayed. Accordingly,
iH these lines the January. 1922,
statements show Improvement far
less than the average, but a better
outlook Ia indiacted for the mid-year
statements. In such lines. progress
has been made only since the opening
Of the present year.
Mercantile Credit Conditions.
During the last few years, the
length OF the credit period granted
the buyer by the seller has in.
creased percepubIy. This, however,
n not reflected to a very marked
degree in the regular terms of sale
IlEl===z7====z=5=z;===z