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758 EXPANSION [Bk. IV tion is able to purchase material, equipment, and supplies more intelligently and at better terms than the local organization. It is presumed that the central organization can deal more intelligently and far-sightedly with the public authorities and the customers than can the local organization. It is presumed that the central organization can secure the capital required for extensions more easily and at cheaper rates of interest than the local organization. Upon the truth of these presumptions— particularly the first and the last—rests the economic and social justification of the public utility holding company, and so important has this form of organization become that each of these grounds of economic efficiency should be carefully weighed.' Superior Technical Efficiency.—The superior technical efficiency of a centralized management as compared with a local management is most often alleged as the conspicuous advantage of the public utility holding company. This allegation deserves considerable attention. It has been pointed out already in con-i The advantages of the public utility holding company over the independently owned and operated local utility have been often reviewed. Nowhere have these advantages been more clearly expressed than in a certain brief filed May i l , 1914, with the Interstate Commerce Committee of the United States Senate with reference to Senate Bill No, 4160. "The holding company unites under one control and management the public utilities of several communities. The increased volume of business so obtained enables the holding company to make the expenditure necessary to secure a thoroughly competent executive, engineering, and operating staff, whose services are available to all of its subsidiaries. Thus, along with the resulting increase in efficiency, the expenses of each subsidiary are materially reduced. Expenses are further reduced by the standardization of materials and supplies, and by the purchasing of such supplies by skilled purchasing agents in large quantities in a far wider market and upon much better terms of credit than could possibly be secured by the separate local companies acting independently. The centralized expert management effects further economies in the cost of production by the standardization of operating and accounting methods. Plants are combined and construction work is standardized, so that equipment outgrown by one community can be utilized by transfer to another smaller community, instead of being discarded as useless; in this way the enterprise is run with a minimum amount of capital, and depreciation charges are materially lessened. The distribution of the business over an enlarged territory 'averages the risk' and secures the holding company against irreparable damage from purely local causes. All of these improved conditions operate to increase the attractiveness of the enterprise to the investor, and, consequently, to bring about the very great economy of decreased cost of capital and the resultant fixed carrying charges."
Beschrijving voorwerp
Titel | The financial policy of corporations |
Auteur | Dewing, Arthur Stone |
Jaartal | 1926 |
Collectienaam | NIVRA Historisch Archief, UBVU gedigitaliseerd |
PPN | 344552586 |
Toegangsgegevens (URL) | http://imagebase.ubvu.vu.nl/getobj.php?ppn=344552586 |
Signatuur origineel | NIVRAHA149 |
Evaluatie |
Beschrijving
Titel | NIVRAHA149_00782 |
Transcript | 758 EXPANSION [Bk. IV tion is able to purchase material, equipment, and supplies more intelligently and at better terms than the local organization. It is presumed that the central organization can deal more intelligently and far-sightedly with the public authorities and the customers than can the local organization. It is presumed that the central organization can secure the capital required for extensions more easily and at cheaper rates of interest than the local organization. Upon the truth of these presumptions— particularly the first and the last—rests the economic and social justification of the public utility holding company, and so important has this form of organization become that each of these grounds of economic efficiency should be carefully weighed.' Superior Technical Efficiency.—The superior technical efficiency of a centralized management as compared with a local management is most often alleged as the conspicuous advantage of the public utility holding company. This allegation deserves considerable attention. It has been pointed out already in con-i The advantages of the public utility holding company over the independently owned and operated local utility have been often reviewed. Nowhere have these advantages been more clearly expressed than in a certain brief filed May i l , 1914, with the Interstate Commerce Committee of the United States Senate with reference to Senate Bill No, 4160. "The holding company unites under one control and management the public utilities of several communities. The increased volume of business so obtained enables the holding company to make the expenditure necessary to secure a thoroughly competent executive, engineering, and operating staff, whose services are available to all of its subsidiaries. Thus, along with the resulting increase in efficiency, the expenses of each subsidiary are materially reduced. Expenses are further reduced by the standardization of materials and supplies, and by the purchasing of such supplies by skilled purchasing agents in large quantities in a far wider market and upon much better terms of credit than could possibly be secured by the separate local companies acting independently. The centralized expert management effects further economies in the cost of production by the standardization of operating and accounting methods. Plants are combined and construction work is standardized, so that equipment outgrown by one community can be utilized by transfer to another smaller community, instead of being discarded as useless; in this way the enterprise is run with a minimum amount of capital, and depreciation charges are materially lessened. The distribution of the business over an enlarged territory 'averages the risk' and secures the holding company against irreparable damage from purely local causes. All of these improved conditions operate to increase the attractiveness of the enterprise to the investor, and, consequently, to bring about the very great economy of decreased cost of capital and the resultant fixed carrying charges." |
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