NIVRAHA149_00949 |
Vorige | 949 van 1308 | Volgende |
|
klein (250x250 max)
gemiddeld (500x500 max)
groot
Extra Large
groot ( > 500x500)
Hoge Resolutie
Allen (PDF)
|
Deze pagina
Allen
|
Ch. 2] CAUSES OF FAILURE 925
a single year or even two years of reduced business, the iK)licy
is at best questionable. No doubt the New Haven Railroad's
plight was aggravated by the fact that in the four years from
iQioto 1915 the dividend payments every year exceeded the
profits available. No sufficient excuse for the mistake can
be found in the desire to protect the small investor or in the
hope of maintaining the company's credit among savings banks.
This entire matter has been discussed in its proper place before,'*
but it is important to note again that the continued
payment of interest or dividends in excess of earnings can
have only one outcome, however successful the policy may
appear to be for a short period.
Superficial Signs of Failure—These, then, are the four
causes underlying corporate failure—destructive competition,
unprofitable expansion, a sudden cessation of demand and the
payment of capital charges in excess of earnings. Yet other
and more superficial causes are usually advanced by corporate
officials in order to explain failure. The favorite excuse for
embarrassment and ultimate bankruptcy is "lack of working
capital." ™ The real situation is ordinarily this. The disaster
"1 This excuse has been alluded to in other connections. It makes
itself felt during the preliminary discussion of almost every reorganization.
In the case of industrials it is invariably used. If one should examine the
host of circulars and statements made by corporation officials just prior to
business failure, one would find that lack of working capital was alleged
to be the chief cause of failure in the great majority of cases. It is a
very plausible, and on the whole non-committal, form of excuse. Even as
keen an observer as Thomas W. Lamont mistakes the apparent for the
essential when he says: "In the instance of industrial corporations, be
they manufacturing or mercantile, I am safe in saying that lack of sufficient
working capital stands out as the most frequent cause of disaster." ^''
Inadequate working capital is less often advanced as the main cause of
railroad failure, although instances abound. Thus President McLeod
after he had brought the Reading road into bankruptcy by burdensome
leases of the Lehigh Valley and Central of New Jersey and speculations in
the securities of the Boston and Maine, the New York and New England
and allied roads, remarked naively at the time receivers were appointed for
this road: "The trouble was brought about by the fact that we were doing
an enormous business on a small capital." ^ The financial world was
^•1 Book Ur, Chapter VI, on dividend policy.
* Lecture before the Graduate School of Business Administration, Harvard
University (February 5, 1909). Notes, page 516.
=" iS Ry. Age 164 (1893).
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_00949 |
| Transcript | Ch. 2] CAUSES OF FAILURE 925 a single year or even two years of reduced business, the iK)licy is at best questionable. No doubt the New Haven Railroad's plight was aggravated by the fact that in the four years from iQioto 1915 the dividend payments every year exceeded the profits available. No sufficient excuse for the mistake can be found in the desire to protect the small investor or in the hope of maintaining the company's credit among savings banks. This entire matter has been discussed in its proper place before,'* but it is important to note again that the continued payment of interest or dividends in excess of earnings can have only one outcome, however successful the policy may appear to be for a short period. Superficial Signs of Failure—These, then, are the four causes underlying corporate failure—destructive competition, unprofitable expansion, a sudden cessation of demand and the payment of capital charges in excess of earnings. Yet other and more superficial causes are usually advanced by corporate officials in order to explain failure. The favorite excuse for embarrassment and ultimate bankruptcy is "lack of working capital." ™ The real situation is ordinarily this. The disaster "1 This excuse has been alluded to in other connections. It makes itself felt during the preliminary discussion of almost every reorganization. In the case of industrials it is invariably used. If one should examine the host of circulars and statements made by corporation officials just prior to business failure, one would find that lack of working capital was alleged to be the chief cause of failure in the great majority of cases. It is a very plausible, and on the whole non-committal, form of excuse. Even as keen an observer as Thomas W. Lamont mistakes the apparent for the essential when he says: "In the instance of industrial corporations, be they manufacturing or mercantile, I am safe in saying that lack of sufficient working capital stands out as the most frequent cause of disaster." ^'' Inadequate working capital is less often advanced as the main cause of railroad failure, although instances abound. Thus President McLeod after he had brought the Reading road into bankruptcy by burdensome leases of the Lehigh Valley and Central of New Jersey and speculations in the securities of the Boston and Maine, the New York and New England and allied roads, remarked naively at the time receivers were appointed for this road: "The trouble was brought about by the fact that we were doing an enormous business on a small capital." ^ The financial world was ^•1 Book Ur, Chapter VI, on dividend policy. * Lecture before the Graduate School of Business Administration, Harvard University (February 5, 1909). Notes, page 516. =" iS Ry. Age 164 (1893). |
Tags
Toelichtingen
Geef een Toelichting voor NIVRAHA149_00949
