Most business men are coming to believe that the giver of credit is a contributor of capital and becomes in a certain sense a partner of the debtor; as such he has a perfect right to complete information of the condition of the debtor. It is becoming more generally recognized, also, that no credit managers will willingly refuse credit to a customer if there is any justifiable proportion between the credit asked and the basis of credit upon which such a request is predicated. It has been indicated that statements come in two ways, directly and indirectly. Many houses still believe that the report of the mercantile agency is sufficient and many firms asking credit will often refer such a request for a direct statement to the mercantile agency for an answer. If all honest successful debtors could be convinced that direct statements are effective instruments, tending to eliminate fraud, then they would accede more cheerfully to requests for such statements. Such financial statements are not evidence of weakness but rather enhance the faith which is already a part of the credit relation. Forms of Financial Statements.-There are almost as many forms of financial statements as there are individual accountants and auditors who prepare them, but in recent years there has been a pronounced tendency to standardize reports of financial standing both in trade associations and among the public generally. Certified public accountants, committees representing bankers' associations, and credit and trade associations have worked together for the standardization of these financial reports so that time may be saved in their analysis and the purpose for which they have been created may be achieved. The National Association of Credit Men has adopted standard forms which it provides for its members, attempting to take advantage of all of the desirable points in the prepara tion of such statements. One of the simpler forms is presented in Figure 17. Other good statement forms are those used by Federal Reserve Banks shown in Figures 18-20. They are intended merely as guides and are not presumed to be sufficiently comprehensive to cover all concerns. More complete statement forms-adopted and recommended by the National Association of Credit Men are shown in Figures 21 and 22. Form of Profit and Loss Statement. It is sometimes important to obtain more intimate information concerning the progress of a business than is revealed by a financial statement. To know the actual profits and expenses of a business is to know more of its credit capacity. It can be seen by examination of the following simple form that much valuable information is made available. Its actual interpretation is taken up in another paragraph. PROPERTY STATEMENT OF TO.. This space for name of party (ALL QUESTIONS SHOULD BE ANSWERED. WHEN NO FIGURES ARE INSERTED, WRITE WORD "NONE") 192. Merchandise, Cost or Market Value. Accounts and Notes Collectible. Cash on Hand. Cash in Bank. Machinery, Fixtures and Equipment (Present Value). Real Estate. Other Assets. Annual Sales for Cash Total Annual Expenses Insurance on Merchandise and Equipment Life Insurance for benefit of the Company Do you hold any merchandise on consignment or conditional sale?. Is any machinery or equipment held on conditional sale or lease?. If any creditors are secured by Lien or Chattel Mortgage, state amounts and how secured. Name and Address of your Bank?.. Figure 17. Statement Form Adopted by the National Association of Credit Men I make the following statement of all my assets and liabilities as at the close of business on. Title. The title to all above described real estate is in my name solely, except as follows:. I hereby certify that the figures and statements contained on both sides of this sheet are true and give a correct showing of my financial condition. Figure 18a. Form used by Federal Reserve Banks-Farmers (face) |