land, most of the banking capital of the country is held, there were few banking defaults and the losses resulting from them were comparatively small. All of which is encouraging and is another proof of the strength of our banking structure. The largest number of banking suspensions occurred in those sections of the country where difficulty was found in marketing the crops, the farming districts where the troubles of the farmers affected the banks which serve them. For the past ten years the yearly average of failures among all concerns doing business has been .86 of one per cent; and it may be interesting to examine briefly some of the reasons why failures occur, what are the causes for what Dun calls "commercial mortality." Bad luck may be described as one of them and bad management another, although it is practically impossible in many cases to distinguish between the two. Of course a business may be ruined by conditions over which its managers have no control, as many businesses in Russia were ruined. That is bad luck. The rapid decline in the value of farm products without a corresponding decline in the cost of other commodities ruined the business of many a farmer. That too was bad luck. The unsettled state of trade throughout the world has brought about the insolvency of numerous businesses in recent months, and that in many cases was also bad luck. And conditions under which business must be carried on are far more difficult at certain times than at others. Periodically years roll around when readjustments must be made, and if a business has not prepared itself to withstand the shock of them it is liable to be forced into bankruptcy. Such a year was 1921, the "rainy day" year for business, when 19,652 commercial failures were recorded. Every business, however, should prepare for these rainy days. Every one knows that business is largely conducted on credit. A manufacturer or wholesaler finds himself in need of cash to purchase machinery or supplies, and he goes to his bank and borrows the amount of cash required to finance these purchases. Then with the aid of his new machinery the manufacturer turns out more work, and with the proceeds obtained from the sale of these services pays off his loan at the bank; or the wholesaler sells the goods his loan has enabled him to buy and liquidates his loan with the money received in this way. Suppose, however, after the manufacturer has borrowed money to buy new machinery, that business suddenly slumps and he cannot get work to keep his machinery busy. Under such circumstances it becomes a liability instead of an asset. It must be paid for, and the loan at the bank must be met when it falls due. Without earnings there is no cash, and unless the bank is willing or able to extend his credit the manufacturer becomes insolvent. He cannot pay the bank and he cannot pay his other creditors, and he is forced into FINANCIAL DEPARTMENT (Continued) bankruptcy. Suppose the wholesaler buys a large stock of goods and shortly afterwards prices fall and he cannot sell them for what they cost him. He borrowed money to buy these goods, and then finds himself loaded with a stock of merchandise which can be disposed of only at a loss, and this loss combined with the costs of doing business places him in a position where he cannot meet his obligations, and he too fails. These are two very simple examples of some of the reasons for commercial failures. They illustrate, however, the reasons why conservative bankers urge investors to buy the securities of only those companies which are in a position meet such conditions when they sent themselves. A company should Are You An Investor? During the past year the Financial Editor of The Outlook has helped hundreds of Outlook readers to solve intelligently their particular investment problems. Perhaps you are contemplating a shifting of your present holdings or have fresh funds to invest. In either case we shall be glad to give you specific information on any securities in which you may be interested. A nominal charge of one dollar per inquiry will be made for this special service. The Outlook Financial Department, The Outlook, 381 Fourth Ave., N. Y. C. Write for this Boklet have enough cash on hand for any emergency which may arise in connection with its business; if not cash, it should have enough "quick assets"that is merchandise, securities, commercial paper, etc., which can be readily converted into cash-for such a purpose. A company should not have too many fixed obligations-bonds, for instance, issued in such volume that the average earnings are only barely sufficient to meet the interest, which must be paid. A company which does not observe this rule is in a position similar to that of a man who has a big mortgage on his house, notes outstanding against him, and an income barely sufficient to cover the interest he must pay, to make no mention of paying off the loans when due. He is continually "in the hole" and is not conducting his affairs on a businesslike basis. A business which is not managed conservatively, which over-extends itself in additions to its plant, or stocks of goods on hand, is in danger when the rainy day comes. An individual who spends more than he is justified in spending is also going to find himself in difficulties when the day of reckoning stares him in the face. In other words, the management of a business differs very little from the management of individual affairs. The principles which apply to the one are equally applicable to the other. In our opinion, the seat of the trouble is in the majority of cases the failure of the business or of the individual to take the rainy day into account, and prepare for it. Many businesses were unprecedentedly prosperous during the war; demands for their products seemed to be limitless and profits were enormous. Easy money poured into their treasuries, and the management lost their heads in many instances. They reasoned that if they could make large profits with the plant and equipment they had, why would it not be possible to make profits twice as large if their plants were doubled in size and they were possessed of twice as much equipment. Why not? It seemed reasonable, and they immediately set to work to increase their facilities so that their profits would be increased in proportion. The only difficulty was that these companies failed to realize that the conditions which created the demand for their goods, and made it possible for them to do business on such a profitable basis, were only temporary. They forgot that the time was surely coming when, instead of demanding their goods in unlimited quantities and being willing to pay any price for them, the world would get along with as small a quantity as possible and would further inquire very carefully into the cost before it committed itself to buy. When this time came, many concerns found themselves equipped with enormous plants for whose output there was no call and great stocks of raw materials for which they had paid high prices and with which there was nothing to do because no one wanted to buy the finished prod ucts. This policy, followed by many businesses, accounts for many of the 19,652 failures in 1921. And how many thousand individuals were affected by these 19,652 failures it is of course impossible to say. How many other individuals were affected by the decline in value of the securities of companies which did not actually fail is even more impossible to state with any degree of accuracy. Every one has been affected in some measure by the business depression of course, but it is safe to say that those who knew the storm was coming and prepared for it were the ones best able to weather it. One of our largest corporations gave an excellent demonstration during the past few years of the reasons why it is one of our largest corporations, and of how a business should be conducted. It made enormous profits, like many of the others, but, instead of spending all this money or investing it in additions to its plant, it allocated a large portion of it to surplus, until now its surplus account has nearly three times as many millions in it as it had before. Consequently this corporation is in a stronger position than ever, its security holders are better protected, and the shareholders really have more valuable stock than they had previously, even if it does not pay as large dividends as during the period of prosperity. This corporation merely kept sight of the fact that its unexampled prosperity was not permanent. It therefore saved a large part of its profits to safeguard itself against the hard times that it realized must come later. In other words, it prepared for the rainy day; and if all businesses and all individuals would learn the simple truth that it is bad policy to spend all they earn there would be fewer rainy days for all of us. QUESTIONS AND ANSWERS Q. Please advise me if the preferred stock of the Standard Oil Company of New Jersey is considered a good investment. Is this issue callable? What dividend does it pay? A. Standard Oil of New Jersey preferred is rated a high-grade investment. Dividends are payable at the rate of $7 a share a year. It is callable at 115 and dividends on any quarterly dividend date three years after date of issue. Q. Will you tell me something about the City of Tokyo 5 per cent bonds, due 1952? Are they considered a good investment? A. There are outstanding £5,175,000 of the City of Tokyo 5s, due 1952. They are a first charge upon the annual net revenues of the electric tramways and electric lighting undertakings of the city and a general charge upon other revenues subject to the charges for an underlying loan of £1,500,000. There is a cumulative sinking fund of 1 per cent a year by annual drawings at par or purchase below par, with an option to the city to accelerate the fund at any time or repay the whole or part of the loan beginning with 1922 on six months' notice. The bonds are rated as highgrade investments. 158 THE OUTLOOK alifornia Picture Book Something unique in travel Contains birds-eye map of MAILED FREE UPON REQUEST, with our "Off the Beaten The Santa Fe operates four daily trains to California-two of Fred Harvey meals "all the way." PE 25 January BY THE WAY ERHAPS it was not "Marse Henry" who wrote the following paragraph printed a few weeks ago in the Louisville "Courier-Journal," but at least it must have been a writer trained in his school: "A 'prominent author' is the novelist who wrote this year's bestseller. An obscure writer is the novelist who wrote last year's best-seller." From an unexpected source comes this recommendation that the railways should observe Sunday as a day of rest. It is signed "Assistant Superintendent" and appears in the "Railway Age:" "I know that many old-time railroad men will not agree with me," the writer says, "that it is practical to operate a railroad on an eight-hour basis and without Sunday work. But I claim that such a thing is possible and that the railroads of this country would save millions each year if they would come to an eighthour day six days a week, from the president to the section laborer. I was yardmaster on one of the lines [during the war] which practically tied up from seven o'clock Sunday morning until midnight. By Monday night we were just about as far ahead as if we had worked every engine in the terminal on Sunday." The "Personal" column of the London "Times" recently printed these peculiar "wants:" Society Gossip wanted by highclass weekly paper. Gossip must be good-natured, accurate, and by one who is actually in Society, not a professional journalist. Address Times. Live Snakes (Cobra di Capello and Exchies Coronata) urgently needed for the preparation of Anti-Tuberculosis Serum. Officers of I. M. S. specially appealed to. Address Times. Referring to a passage in "Silhouettes," by Dr. Lyman Abbott, a subscriber says that he personally saw Barnum's famous "whale" in the basement of the old Museum at Ann Street and Broadway, New York City, but at the time he was not old enough to perceive that a whale could not have been brought through a door only two and a half feet wide. "Barnum and I," our correspondent continues, "had a table together one winter at the Sturtevant House. I asked him about the whale. He told me that it was made of rubber." When an oil well "comes in" after the final drilling, Mrs. Clare Sheridan says in describing a visit to Mexico in the "Metropolitan," the drillers first let the well "clean herself out," which it does with a roar and rush of gas that sometimes throws the drilling tools out of the hole. "The gas is very inflammable, and not even an automobile is allowed to pass within a radius of 300 meters during the incoming of a well. When the big fire was raging in Amatlan, the only method of closing the well was to tunnel to the casing that incloses it and (Continued on page 160) Tours and Travel Tours and Travel Hotels and Resorts Hotels and Resorts NORTH CAROLINA MARGO TERRACE Asheville, N. C. A delightful hotel home. Write P. H. BRANCH, Prop. Health Resorts Conducted Tours to SICILY, GREECE and SPAIN Sailing March 4, April 6 and 12 OUR Scholarly leaders TOURS Interpretive talks have Leisurely itineraries For details write BUREAU OF UNIVERSITY TRAVEL 15 Boyd Street, Newton, Mass. EGYPT, PALESTINE Sail March 8 MADEIRA, GIBRALTAR, ALGIERS, MONACO, NAPLRS, CAIRO, THE NILE, JERUSALEM, CONSTANTINOPLE, ATHENS. EUROPE 1922 ITALY, SWITZERLAND, FRANCE, BELGIUM, HOLLAND, ENGLAND, THE PASSION PLAY. Limited parties enrolling now. TEMPLE TOURS 65A FRANKLIN ST.. BOSTON, MASS. Europe Beckons Wayside Inn Litchfield, Co., Conn. British Isles, Switzerland, Passion Play, Tyrol, Italian Lakes, France. THE BEST MODERATE PRICED TOURS WORTH TOURS Eleventh HILE Season 821 Centre St., Boston 30, Mass. EUROPEAN TOURS $650 upward including Passion Play Best Hotels only Personally conducted; established twenty years. Special rates to organizers of parties. Accommodations limited. Book now. E. D. QUICK, 488 Nostrand Ave., Brooklyn, N. Y. The foothills of the Berkshires. A restful place for tired people. Good food and a comfortable home. 2 hours from New York. Booklet A. Mrs. J. E. CASTLE, Proprietor. MASSACHUSETTS THE WELDON HOTEL GREENFIELD, MASS. offers special winter rates for rooms, and will serve at a moderate price a Club Breakfast, Special Noonday Luncheon, and Evening Dinner. A series of weekly musicales and monthly dances given for the pleasure of our guests. For further particulars apply to J. T. SELLER. Manager. EUROPEAN TOURS Rock Ridge Hall Popular Routes; Abundant First Class Hotels; Skilled Interpretation of European Art, History, Literature, Music; Travel Schools for Intensive Language Study. INTERCOLLEGIATE TOURS Boston, Mass. 65-A Franklin St., WELLESLEY HILLS, MASS. Fine location. Hot and cold running water in nearly all bedrooms. Private baths. Sun-room. Our table a specialty. Terms moderate. Tel. East Coast of Florida Is full of surprises. The gorgeous Win ter climate and brilliant coloring is a perpetual surprise, even to the visitor of many years' standing. The mingling of ancient historical landmarks with the finest specimens of modern architecture is another. Greatest of all is the famous Palm Beach.. Royal Poinciana and Breakers New York Office: 243 Fifth Avenue St. George's, Sutherland Pinellas Florida Co. A Southern plantation, with all modern conveniences; located in a pine-forest, in the best part of Florida's justly famous climate; refreshing, restful; fine Southern table; own dairy and garden; outdoor life and recreation in the warm sunshine; an ideal place to spend the winter, especially for convalescents. Terms, very reasonable. Write for leaflet. NEW YORK CITY HOTEL JUDSON 53 Washingadjoining Judson Memorial Church. Rooms ton Square with and without bath. Rates $3.50 per day, including meals. Special rates for two weeks or more. Location very central. Convenient to all elevated and street car lines. The Margaret Louisa of the Y. W. C. A. 14 East 16th St., New York City A homelike hotel for self-supporting women. Rates, $1.00 to $1.50 per day. Send for circular. Hotel Webster (Near 5th Avenue) 40 West 45th Street NEW YORK OARD for one or two persons in an exceptionally pleasant house in the country, near Wilton, Conn. Every convenience, hot-water heating, electric lights, bathrooms, telephone. Special attention paid to diet. Fresh eggs, poultry and milk from the farm. References exchanged. 6,211, Outlook. Apartments WANTED housekeeping apartment, fully furnished, from early February until June, between 59th and 90th Sts., 5th and Lexington Aves. Must have three master's rooms, sunny exposure. Must be reasonable, and absolutely first class. Tenants are most desirable, being two ladies. Best of references can be given. 6,231,Outlook. Wanted, for 4 or 5 months, by responsible couple from suburbs, small homelike furnished apartment located below 60th St., N. Y. Reasonable. Refs. exchanged. 6,243, Outlook. Directly in the fashionable club and shop. Hotel Leonori 63d Street and ping section. Within five minutes' walk to all principal theaters. A high-class hotel patronized by those desiring the best accommodations at moderate cost. Rates and map gladly sent upon request. JOHN P. TOLSON, Prop. Madison Ave. Corner apt., 4 rooms, 2 baths; present tenant's furnishings; 3 months or more from Feb. 1. Real Estate FLORIDA Hotel Le Marquis IN FLORIDA 12 East 31st Street New York Combines every convenience and home comfort, and commends itself to people of refinement wishing to live on American Plan and be within easy reach of social and dramatic centers. Rates with Illustrated Booklet gladly sent upon request. KNOTT Management. Hotel Hargrave West 72d St., through I am offering for sale the following property: 2 acres in grove, facing Indian River, at Merritt, on Merritt Island, opposite Cocoa, near new casino, with 8-room two-story bungalow, also 3-room bungalow, both completely and newly furnished, modern improveinents, garage, dock, boathouse, $12,000. Also new white brick store, two stories, both rented, with adjoining lot facing Indian River, with riparian rights, at Cocoa, opposite best hotel, for low price of $20,000. Five-room cottage, bath, facing Indian River, at Rockledge, for $7,000, furnished and rented. BLAIR, Cocoa, Fla., Box "M." |