PREFACE In the past, men have come into the credit field without previous preparation. Their entrance into this line was frequently not a matter of deliberate choice and planning and they have had to acquire the special knowledge of the problems that presented themselves for solution largely through experience. However, the attendant waste of time and money, together with the increasing complexity of the credit system and its operation, has instilled in the modern and progressive credit manager a desire to proceed scientifically. He has discovered that although some of the special knowledge required of him can be learned only from experience, much can also be acquired through diligent study. Accordingly, many of the colleges and universities are at present offering courses in Credits and Collections, and successful attempts have been made on the part of the Institute of Credit of the National Association of Credit Men, through the classes which are conducted under its direction, to introduce those entering the profession to this tremendously important subject and to aid those already in the field in the acquisition of supplementary knowledge and a broader perspective. To accelerate the movement in this direction, the author has long felt that there was a need for a book covering the general field of credits and collections which would serve both the college student and the man in business; a book that would not only give the reader exact, definite, and practical information, but one which would also obviate the necessity of resorting to several books dealing with the various phases of the subject. This book attempts to cover the entire field of credits and collections, both foreign and domestic. Although special attention is given to mercantile credit, attempts have nevertheless been made throughout to maintain a proper balance between the various classes of credit and to set forth in as logical and concise a manner as possible the best theory underlying credit work and the lessons learned as a result of the experiences of men actually practicing the extension of credit and the collection of accounts. The author is greatly indebted to many recent discussions in books and in trade magazines for which acknowledgment is made in the appropriate places in the text. The names of the business men and of others who have furnished the author with information and other material not in published form, are too numerous to give. There are, however, a few to whom he is particularly indebted: J. E. Fagan, manager of the Central Ohio Credit Interchange and Adjustment Bureau; Raymond Link, credit manager of the Ohio National Bank; A. G. Sharkey and J. E. Ryder, manager and assistant manager, respectively, of the Columbus Branch of R. G. Dun & Co.; and W. Vorhees, of the Bradstreet Company. The author wishes, also, to acknowledge the invaluable assistance rendered by Dean J. E. Hagerty and Professor W. C. Weidler, of Ohio State University, who have offered many valuable suggestions and have read portions of the manuscript. THEODORE N. BECKMAN. COLUMBUS, OHIO, NATURE AND FUNCTIONS OF CREDIT. Credit Defined-Relation between Credit and Wealth-Impor- Credit Forms of Unlimited Acceptability-Book Accounts- Promissory Notes-Bonds-Orders to Pay-Checks-Bad Check Law-Drafts-Trade Acceptances-Bank Acceptances-Travel- ers' Letters of Credit-Commercial Letters of Credit-Certifi- INVESTMENT AND BANKING CREDITS. Investment Credits-Sources of Investment Credits-Banking Credit-Development of Bank Credit Work-Importance of Bank Credit Work-Banks and Commercial Houses Compared- Loans and Discounts-Kinds of Bank Loans Loans Through Note Brokerage Houses-Advantages of Selling in the Open Market-Advantages of Buying Paper in the Open Market- Definition and Significance-Arguments for Retail Credits- Arguments against Retail Credits-Factors Determining Cash or Discount Misapplied-The Cash Discount Abuse Terms of Sale Classified-C. B. D. and C. O. D. Terms-"Cash" Terms- Ordinary Terms of Sale-E. O. M. and M. O. M. Terms- Evolution of the Credit Profession-Importance of the Credit Manager-Essential Qualifications of a Credit Manager-Func- tions of the Credit Manager-Index to Credit Department Effi- Basic Factors Determining the Credit Risk-Character-Capac- ity-Capital Collateral-Relative Importance of the Three "C's"-The Credit Equation-Modifying Elements Determi- Definition and Types of Mercantile Agencies-General Mercan- tile Agencies History of Dun's and Bradstreet's-Extent of Operations-Obstacles Encountered-General Scheme of Organ- ization Classes of Investigators-Functions of General Agen- cies Commercial Rating Books-Ratings-Utility of Commer- cial Ratings Special Reports-Contents of Agency Reports- Dun's Trade Report Department-Typical Agency Reports- Letters of Introduction-Derogatory News-Business Publica- tions-Cost of Agency Service-Criticisms of General Commer- cial Agency Service-Special Mercantile Agencies-Functions of DIRECT INTERCHANGE AMONG CREDIT GRANTORS Need for Ledger Experience-Significance of Paying Habits- Securing References-Methods of Direct Interchange—Personal Contact-Credit Department Investigator-Trade Groups- Advantages of Oral Interchange-Objections to Oral Interchange |