Financial transaction

“ Is it for the best financial interest of the company to borrow on short or long time, to create a floating or a funded debt, etc.—these points require consideration and can, of course, be answered only in the light of the conditions prevailing in each case as to the status of the working capital requirements. ”

“ With the third method a permanent increase is secured in the capital funds available for use in the business. Financial policy, governed by the needs of the business and its markets, will always dictate the method to be used for extinguishing or contracting a debt. ”

“ Every one of the checks, notes or drafts taken in the transaction is property, just as much as the note taken for a single sale of the goods would have been property. Indeed, every one of the five notes or drafts was just as much property as the goods themselves were, and could be bought and sold just as well as the goods themselves could be bought and sold. Now it must be evident to all of you that in the production, transportation and distribution of commodities, credit performs exactly the same function as money. ”

“ The former mode involved an inquiry into the whole of the financial operations of the bank, its several liabilities, and its available resources; often a complicated and difficult undertaking, and, at best, of uncertain results. ”

“ Some types of undertakings are more subject to the effects of wasting assets than others. Concerns dealing in investments, insurance of all kinds, brokerage and commission, manufacturers’ agents, banking and financial houses, professional firms, and the like, only a small portion of whose capital is tied up in fixed assets, are comparatively unaffected by the charge for depreciation. ”

“ In our judgment, the Exchange, should, however, adopt methods to compel the filing of frequent statements of the financial condition of the companies whose securities are listed, including balance sheets, income and expense accounts, etc., and should notify the public that these are open to examination under proper rules and regulations. ”

“ They soon discount paper for themselves and other stockholders of financial abilities. With this they buy more property to secure more stock, to get more discounts, to buy more property, to secure more stock, etc., etc., and finally they are able to write up a very respectable capital upon which they are permitted to issue double the amount. * * * So long as a few men can draw a profit of more than fifty per cent. ”

“ The moneyed capital thus employed is invested for that purpose in securities by way of loan, discount, or otherwise, which are from time to time, according to the rules of the business, reduced again to money and reinvested. ”

“ The cycle of business operation includes the purchase of merchandise, the payment of operating expenses, and the conversion of merchandise into cash through sale, either directly, as when the sale is for cash, or indirectly as when credit is extended a customer and cash is later collected from him. ”

“ If a careful accounting is made of the profit or loss at the time of the sale of each piece of property and these profits and losses together with the dissolution expenses are summarized and distributed to the partners’ capital accounts, those accounts will of course show the claims of the various partners on the net assets of the business after all assets have been converted into cash and all liabilities paid. ”

“ Where the unit of work is large, conditions are somewhat different, however. The necessary estimates are not based on so many uncertainties, and, oftentimes, financial considerations and an equitable treatment of stockholders demand the determination of profits on work in progress. Thus, one contract extending over a number of years may occupy the entire attention and facilities of a concern. ”

“ Interest on Partners’ Loans.—Careful differentiation must be made between interest on partners’ capitals and on partners’ loans. If a loan is secured from outside parties, its interest cost is a business expense, to be taken into account before determining net profits. ”

“ We may define a business transaction as an exchange of values. It may be between persons, as when a sale is made, or it may be between accounts within the business itself, as when a transfer is made between accounts, i.e., when an item is taken from one account and transferred to another for the sake of more clearly showing its nature. Some authors further analyze transactions as complete when the bargain is fully consummated between the parties, as when delivery is made and the money is paid in cash ”

“ If the sellers of the securities were customers, the banks would make payment by crediting the customers' transaction accounts, deposit liabilities would rise just as if loans had been made. More likely, these banks would purchase the securities through dealers, paying for them with checks on themselves or on their reserve accounts. ”

“ A sells his claim on C to B, who remits it to D in satisfaction of his debt, and D receives the cash from C, so that, assuming the two transactions to be of equal value, one piece of paper satisfies the four parties to these two transactions, and the trouble, expense and risk of sending money from both places are avoided. ”

“ Exchanges within the Asset and Liability Groups.—All changes in individual assets and liabilities, however, are not always the result of business or economic forces. There may be an even exchange of one asset for another asset, as when delivery equipment is purchased for cash. ”

“ The first transaction is of a personal nature between the owners and a third party who is a purchaser; in the other transaction the third party, who is an investor, puts in money to acquire an interest and his investment becomes the common property of all the owners of whom he is now one. ”

“ A vast proportion, far exceeding ninety per cent of all the transfers, bargains, sales of goods, stock, and real estate, are liquidated and settled by the use of checks, bills of exchange and book accounts, without recourse to any actual money whatever. ”

“ The transaction of so large a volume of our business by checks is an element of danger in times of stringency and crisis. In such times the uncalled balance of credit transactions creates a larger demand for money, but the habit of settling by check has meantime kept the available amount of money at a minimum. ”

“ The capital subscribed by the intending shareholders must necessarily be paid in in money or in the legal tender of the country. It is not necessary that the whole should be paid in at the outset, but the payment of the whole usually precedes the full establishment of the business ”

“ The financial organization is the medium by which the various parts of the industrial and commercial organism are held in harmony. It is by the financial organization that capital is collected and distributed, that the friction of exchanges is reduced to a minimum, and that time is economized, through credit, between production and consumption. The financial system furnishes three indicators—prices, the rate of discount, and the foreign exchanges—through which we may read the operation of economic forces now that their magnitude makes it impossible to inspect them directly. ”

“ If a banker can loan on a bill of lading or a warehouse receipt, or a trader can buy the same, or if a man can give a trust receipt to his banker agreeing that all his general shipments or stock in trade shall be the property of that banker until his debt is paid, it makes enormously for the rapid turning over of capital, and the extension of credit. ”

“ In estimating the cost, the elements of price of materials, interest, expenses of manufacture and sale, and other necessary expenditures, if there by any, and bad debts, are to be taken into the account, and usually nothing else. The calculation is to be made as a manufacturer calculates the profits of his business. 'Profit' is the gain made upon any business or investment, when both the receipts and payments are taken into the account. ”

“ With few exceptions, they are devoted to the establishment of provision stores, it having been ascertained that such concerns generally prove the most successful mode of investing the subscribed capital.
The mode of business, as generally conducted, is extremely simple. All transactions are for cash, no credit being allowed; and a simple but efficient system is adopted for the purpose of ascertaining and registering the amount of purchases made by each customer. The profits are divided quarterly, five per cent. ”

“ Recognizing the support which banks and other lenders of money have given to dealers in securities, it should be the policy of such dealers when securities are sold to apply the proceeds toward the liquidation of loans. ”

“ Prices first rise in the particular enterprise, production augments, the movement spreads to other lines of business, and the new enterprises are financed by loans from the banks or trust companies, or by the sale of securities on a capitalization proportionate to the anticipated earnings. In times of buoyancy we are continually capitalizing anticipated earnings and future hopes, and we do this through the utilization of credit on a large scale. ”

“ The stockholders in every corporation or joint stock association for banking purposes issuing bank notes, or any kind of paper credit to circulate as money, shall be individually responsible to the amount of their respective share or shares of stock in any such corporation or association for all its debts and liabilities of every kind. ”

“ They include not only moneys invested in private banking, properly so called, but investments of individuals in securities that represent money at interest and other evidences of indebtedness such as normally enter into the business of banking. ”

“ The credit, which is rendered as secure as possible in all its stages by the accumulating securities of the drawer, acceptor, and endorsers of a bill of exchange, brings capital into activity,—it carries it directly to those channels in which it may be profitably employed,—it conducts it to those channels by a systematic mode of payment for its use, which we call interest, or discount;—and it therefore carries forward accumulation to its highest point of productiveness. ”

“ First, those who have a place of business where credits are opened by the deposit or collection of money or currency subject to be paid or remitted upon draft, check, or order; second, those having a place of business where money is advanced or loaned on stocks, bonds, bullion, bills of exchange, or promissory notes; third, those having a place of business where stocks, bonds, bullion, bills of exchange, or promissory notes are received for discount or for sale. ”

“ It is therefore obvious, that, when you have ascertained the current cash value of the whole funded debt, and the current cash value of the entire number of shares, you have, by the action of those who above all others can best estimate it, ascertained the true value of the road, all its property, its capital stock, and its franchises ”

“ We very frequently see that great trading companies become the means of establishing public credit; on which occasions, it is proper to distinguish between the trading stock of the company, which remains in their possession, and the actions, bonds, annuities, contracts, &c. ”

“ A business firm would hardly pay car fares with checks and liquidate its large liabilities with cash. Each person strikes an equilibrium between his use of the two methods of payment, and does not greatly disturb it except for short periods of time. He keeps his stock of money or his bank balance in constant adjustment to the payments he makes in money or by check. Whenever his stock of money becomes relatively small and his bank balance relatively large, he cashes a check. ”

“ The receipts or capital of the building and loan association consists of periodical payments by the members, interest and premiums paid by borrowing members or others, fixed periodical instalments by borrowing members, fines for failures to pay such fixed instalments, forfeitures, fees for transferring stock, entrance fees, and any other revenues or payments,—all of which go into the common treasury. ”

“ As a sub-group under Current or as a separate group we find Working and Trading assets. Other groups are Fixed or Capital, Investments, Sinking and Reserve Fund Assets, Deferred Charges to Operation, Deferred Assets, Deferred Debits, Suspense Debits, with similar titles for corresponding credit items, Contingent Liabilities—in short almost any title which seems best to fit the needs of the particular case. ”

“ So a sale upon credit, instead of being for ready money, under a general authority to sell, and in a trade where the usage is to sell for ready money only, creates to contract between the owner and the buyer, and the thing sold may be recovered in an action of trover. ”

“ In accordance with the first fundamental rule, care should be exercised to include all goods out for sale in other markets—these to be valued at full cost in those markets—and all goods not yet received into stock but belonging to the business. ”

“ They frequently allow their customer, the buyer, to take the bill of lading, indorsed, for the purpose of entering the goods at the Custom House, or warehousing them, or even for the purpose of selling the goods, so that the buyer will be in funds to enable him to discharge his debt to the banker. ”

“ If the proprietor begins business with an investment of cash only and without any obligations, an entry in the cash book of the amount invested as a credit to the proprietor’s capital account is all that is necessary. If the investment consists of a variety of properties and liabilities to creditors, and obligations on leases, salaries, etc., are assumed, a very careful and complete record should be made in the journal, showing the kinds and values of the properties invested, and the kinds and amounts of the liabilities assumed. ”