New Britain herald., 1927-07-13

ables to merchandise. cebt to net
worth and net worth to fixed assets.
The second group (dyn Amic). sales
to receivables. sales to merchandise,
sales to net worth. sales to fixed as
sets.
THE current ratio Of quick assets
to quick liabilities determines the
degree of liquidity.
The ratio OF receiva bles to mer-
chandise will reveal the presence or
absence Of window dressing. While
/. is not a common practice. yet
there are instances where a mer-
chant with statement time near at
hand. and DESTROYS of bolstering up
his current ratio, will resort to the
questionable expediency of inducing
a friendly buyer under repur-
chase agreement to buy Il substantial
amount of his merchandise with cost
plus the profit being reflected in the
! receivables thus obtaining an en-
HANGED current ratio. with which to
go to his banker for line of credit.
The SO called business cycle is re-
tlected in this ratio: a Using market
swelling the receivables, and q fail
ing market curtailing them.
Debt to net worth. In most bust
ness enterprises, there are two forms
of capital employed: the owners and
the creditors. The ratio between the
amounts of those two determines
ho really owns the business, the
owner of his creditors.
Net worth to fixed .-ssets. This
ratio determines the amount of net
conduct of the business.
The dynamic or velocity ratios.
Sales to intellectually this ra-
ito shows the degree of l:quidity of
receivables. There are other factors
such as terms of sale which have to
b. taken into account in order to OBJ
tain accurate information.
SALES to merchandise-This ratio
determines the freshness and sala-
tllity of merchandise.
''Sales to worth-Reveals the ra-
pidity OF turnover of invested CAPT.
tai. Also shows normal or abnormal
activity and possibly the presence OF
dry rot.
Sales to fixed assets--Determines
efficiency of plant.
lat this point comes the question
as to whether or not there are
standard ratios for the various lines
of industrial mercantile activity.
There are for some, but rot for all
lines OF trade.
And now just word about the
banker, and the points of difference
between bank credit and mercantile |
credit. 1t should be borne in mind |
that the banker does not loan his
own money but money of his deposit
tors, and is. therefore, trustee, and, |
invested with all the responsibilities |
of a trusteeship. The merchant, on
the other hand, hazards his own !
wealth in extending credit to his
customers. Again, in the bank loan
there is a greater amount of money |
involved per risk than there is in the
loan, and finally, the
amount of profit accruing to the
banker per dollar Of risk is many
times less than the margin of profit
to the merchant on his extension OF
credit. The banker, therefore. Is of
necessity more cautious In loaning.
and more thorough in his investiga-
ton.
lat the beginning OF this talk I
quoted a text of Scripture. and
want to conclude 1t by another quo
tation: Faith is the substance of
things hoped for-the evidence of
things not seem That word faith
is not mere belief only. but really
understanding, and refers to
the innate constructive quality of
thought. which, put into practice in
the business world. results in en-
HANGED spiritual and material we'll
being"
The club voted to purchase an
acre of ground in Barkhamsted ad-
joining the Peoples Forest. Each XII
wants club in the state is purchas-
ing an acre at the rate of $40 an
acre. This plot later will be pre-
scented to the state forestry depart
ment in connection with a reforesta-
ton movement.