Perth Amboy evening news., 1923-02-17
Budgeting For Business Control

LOodS oPPS&AS OSAAA~
times incomprehensible. W. feel
very much like a schoolboy at a
new school and in his first term"
And is it any wonder that business
appears strange and unfamiliar in
the light of the last five years
the terrific demands of the war, the
momentary pause, the postwar ex-
p%ansion, the sudden cessation il de-
mand, the languishing and slow
recovery? But, then the manufac-
turer proceeds. HE (the ~schoolboy)
has to be Initiated, blindfolded, buff
feted, cuffed and ridiculed, but, just
like the ~schoolboy, We love 1t and
we like it."
That is just the point. We do not
like it and we have had enough OF
it. American business has been suf-
ficiently pummeled and interfered
with, raised to the highest optird-
ism and then precipitately thrown
into the depths of despair. This
mad cavorting. this frenzied gallop-
Ing from one extreme to another, -
neither good for business nor good
for the on whose pros
perity the success of the business
depends.
Business recovery is at hand and
WIFI IL COIIl6S tIl0 uColI0 lOI pO1llC
measure of certainty, for business
stability, for quiet and healthy de-
velopment and growth that bust
ness prosperity may be reasonably
prolonged and business crises may
be me~asureably postponed and miti-
gated Business craftsmanship lies
in the art of coping with the forces
that paralyZe acknowledgements,
friction, immobility, seasonality, ca
tastrophes. By the principle of d.
viding the risk, industry is able TO
Withstand losses from fire, theft, &C
cident or bankruptcy. By re-
search, as in the construction In
dustry seasonal gaps may be closed
BY wise measures total financial re-
sources of a country are male
available. BY statistics of produc-
ton, consumption and stocks, facts
are substituted for guesses. 1t Is
in this gradual conquest of the I'M
certain and the disruptive that
budgetary control is now baking and
taking its place.
Budgeting the Finances
1t Is now necessary on the part
of business men to establish hnan-
cial goals or programs. to definitely
plan ahead what they can Or expect
to do with their financial resources.
There is a widespread feeling that
IL only sales can be made all elsa,
including financing, will somehow
take care of itself. yet there are
limits and strains to which the a.
nancial Of a company can
be safely subjected and it is pos
sible to ascertain such as definitely
or almost as definitely, as n can
the capacity of a machine or the
tensile strength of a piece of steel.
In fact, one of the chief objects CT
the budget is to show as nearly au-
tomatically as possible just how far
capital will safely go and the point
beyond which new capital will be
necessary.
The available capital OF an enter
prise, that Is, it's outstanding CAPT.
tai stock, earned surplus and funded
obligations, are distributed in ratios
that will vary from industry to In
dustry and from plant to plant
among buildings, and equipment, in
ventories, cash on hand. and the net
of current receivables over current
payables.
Necessity of Minimum Return
The least such a distribution OF
capital must afford, If the enterprise
is to continue fu~nctioning, is a falr
return on investment; that is to say
the capital invested ought to yield,
first, a rate of interest that might
be obtainable from good marketable
securities, and, second. a profit that
will take care of the risks and haz-
ards of the business and allow for
its continued growth and expansion.
Such might be termed the minimum
return required from invested capt.
tai, upon less than which no BUSH
ness should be predicated or can
long exist.
And the enterprise will secure
this minimum to the degree that
the plant is in keeping with the per-
manent, stable and real demands or
the industry, to the extent that the
equipment Is utilized, to the extent
that inventories of raw and finish
ed materials are in line with sales
and production programs, to the ex-
tent that the work in progress IS
accelerated in its course through
the factory, to the extent that col
lections are made promptly and
within reasonable limits after ship
ment. These are all matters having
a direct bearing as to whether or
not capital is being wisely employ
ed and skillfully utilized.
Uneconomical Uses of Capital
For, an enterprise Is under a Sc
we're handicap that has unduly ex-