Forging Ahead in Business Part 11

Business as it is conducted today would not be possible without the railroad.

The corner grocery store as well as the big manufacturing company is directly affected by traffic, rates and methods. The prosperity of many a business and community is largely dependent upon relations with transportation companies. Yet many business men are unfamiliar with even the elements of rate making and traffic handling.

The war made great changes in railroad organization and when the railroads were returned at the close of the war to their former owners a new set of problems had to be faced. Rail rates had a.s.sumed a new importance, labor and other costs had increased and both s.h.i.+pper and carrier were called upon to consider transportation in an entirely different light than before the war. All of these problems receive careful consideration in this Text, and the tendencies of the times, so far as they have been clearly revealed, are pointed out.

Cla.s.sifications, rates, special services, terminal facilities and charges are some of the specific questions discussed.

FOREIGN TRADE AND s.h.i.+PPING

_Foreign trade: Relation of foreign trade to domestic business_ _The national aspect of foreign trade_ _The market_ _Governmental trade promotion_ _Private trade promotion_ _Indirect exporting_ _Direct exporting_ _The conditions of sale_ _The export department_ _Cooperation for foreign trade_ _Making an export s.h.i.+pment_ _Importing_ _s.h.i.+pping: Principles of ocean transportation_ _The freight service_ _Ports and terminals_ _Ocean freight rates_ _Rate agreements_ _The merchant marine_

The events of recent years have turned the attention of business men of America once more to the problems of foreign trade.

This section of the Course describes the development of our trade with foreign countries. It describes various changes which are at work in this field and the methods by which foreign trade is conducted.

Intimately a.s.sociated with this subject is that of s.h.i.+pping; the transportation problems involved in foreign trade, questions of routes, rates, registry and the like are given particular attention.

The advantages and disadvantages of American and foreign s.h.i.+pping and the problems involved in the up-building of an American merchant marine receive careful consideration.

BANKING

_Cla.s.ses of banks_ _Operations of a commercial bank_ _The bank statement_ _Loans and discounts_ _Establis.h.i.+ng bank credit_ _Bank notes_ _Deposits and checks_ _The clearing house_ _Bank organization and administration_ _Banks and the government_ _American banking before the Civil War_ _Banking in Europe_ _Canadian banking system_ _The National banking system_ _Banking reform in the United States_ _The Federal Reserve system_ _State banks and trust companies_

Business concerns deal in bank credit every day. They have on deposit large amounts of their capital. They rely upon their banks' stability. And yet how few can read a bank statement with real insight and judgment.

The fundamental principles underlying all banking operations are presented under this heading. The nature of money and its relation to credit and capital are described, and the conditions which lead to a general rise or fall of prices are set forth.

The important banking and monetary experiences of the United States are reviewed and full descriptions of the banking systems of the United States, Canada, England, France and Germany are given.

In connection with banking, the source of the banker's lending power and its relation to cash on hand are indicated, as well as the distinction between the bank note and the bank deposit, and the factors controlling the rate of discount.

Banking practice is in large part a study of the banking laws and customs prevalent in the United States, including those governing Federal Reserve Banks, State banks and trust companies.

The subject is fully discussed in this part of the Course, as are also the technical aspects of banking in all details.

INTERNATIONAL EXCHANGE

_Domestic exchange_ _Federal Reserve Bank clearings_ _General aspects of foreign exchange_ _Basal factors of exchange_ _Restoration prospects for rates of exchange_ _Foreign remittances_ _Bills of exchange_ _A day in an exchange box_ _Finance bills_ _Arbitrage_ _Rates of interest_ _Gold s.h.i.+pments_ _Sterling exchange_ _Gold standard_ _Gold exchange standard_ _Silver and paper exchanges_ _London and New York as financial centers_ _War and the exchanges_ _Tables_

The early part of this section of the Course deals with inland exchange and describes the method by which settlements are made between different parts of the same country. When this is fully understood the problem of foreign exchange becomes very simple. It is the application of the same principles complicated only by the difference in money units between different countries.

The "Foreign Exchange" department of banking is of such great importance and presents so many difficult questions that it deserves and is accorded special treatment. The reader is given a full description of the mechanism of the exchange market and is shown how money is made in foreign exchanges.

He learns how the vast amount of export and import trade is made possible through the interrelations between the foreign exchange markets of New York, London, Paris and other large centers. He also learns concretely how foreign s.h.i.+pments are financed and is given some valuable information concerning the influence of gold and other factors upon foreign exchange rates.

An important feature of this section is a thorough discussion of the best methods of handling export s.h.i.+pments. Many American and Canadian manufacturers are considering the advisability of going after foreign trade with greater vigor. They are usually puzzled when it comes to considering how to finance these s.h.i.+pments, which are often a long time in transit. The growing importance of export trade makes this section of the Course particularly valuable.

INSURANCE

_Risk and insurance_ _The life risks_ _Life insurance protection_ _Life policies and premiums_ _Modification of the ordinary life policy_ _Annuities and pensions_ _Group insurance_ _Functions of insurance carriers--the old line companies_ _a.s.sessment and fraternal insurance_ _Government life insurance_ _Accident and health insurance_ _Liability insurance_ _Workmen's compensation insurance--general features_ _Workmen's compensation insurance--rate making_ _Fire insurance_ _Fire insurance policies_ _Marine insurance_ _Other forms of insurance_

Insurance const.i.tutes a form of investment in which we are all interested, as purchasers of life insurance, fire insurance, casualty insurance, marine insurance, or of any other of the various forms which have come into existence. To buy insurance properly, one should know the principles that underlie rates and insurance operations, and should be able to judge the policy which covers these various essentials. Partners.h.i.+p and business insurance is much more used now than it has been heretofore and it is becoming an important element in adding to the stability of business.

Personal or life insurance occupies a large s.p.a.ce in the Text. The nature of the life risk is discussed as well as the means of protection through the straight life policy. The various motives which have prompted these variations and the effect of these modifications upon the premium or the price of insurance are clearly explained. Various types of business organizations with divergent business methods have been devised for the purpose of conducting life insurance. The strength and weakness of the different organization forms are pointed out.

Another aspect of personal insurance is found in accident and health insurance. Obligations toward others generally for personal injuries is the basis of liability and workmen's compensation insurance, of which the latter has had an almost mushroom development of late years.

Property insurance brings up diverse questions in fire insurance and in marine insurance.

THE STOCK AND PRODUCE EXCHANGES

_Functions of stock exchanges_ _Leading stock exchanges_ _The New York Stock Exchange_ _Stock exchange securities_ _Execution of orders, transfers and settlements_ _Methods of trading_ _The speculative transaction_ _Relations of banks to the security market_ _Quotations and news services_ _The curb market_ _Benefits and evils of speculation_ _Influences that affect stock prices_ _Produce exchanges and their functions_ _The future contract_ _Organized spot market_ _The Chicago Board of Trade_

Almost every man in business comes into contact with some one of the exchanges.

Therefore, a detailed description of the organization, operation and management of the princ.i.p.al security and raw material markets of the world is of inestimable value. This is the aim of this section of the Modern Business Course and Service.

Speculation in goods and in stocks exists because it performs an economic service. It saves the manufacturer of cotton goods or flour, for example, from gambling by an operation known as hedging. Business men should understand how speculation performs this service.

The volume closes with a discussion of corners and of the influences governing security and produce prices.

ACCOUNTING PRACTICE AND AUDITING

_Accounting Practice_ _Proprietary accounts_ _Repairs, renewals, depreciation and fluctuation_ _Partners.h.i.+p problems at organization_ _Partners.h.i.+p problems during operation_ _Partners.h.i.+p dissolution_ _Partners.h.i.+p dissolution ill.u.s.trated_ _Consignments and joint ventures_ _Fiduciary accounting_ _Insolvency accounts_ _Corporations_ _Branch accounts_ _Auditing_ _The auditor and his work_ _Scope of auditor's activity_ _Procedure and methods_ _Cla.s.ses of audits_ _Verification of the a.s.set side of the balance sheet_ _Verification of liabilities_ _Reports and certificates_

This section deals with the application of the principles of accounting to the complicated problems that arise in practice. The correct method of treating the proprietary accounts under the different legal types of organization are considered. The management of surplus, the treatment of reserves, the relation between funds and reserves and the method of handling sinking funds are discussed at length.

The differentiation between capital and revenue charges is perhaps the most difficult problem which the accountant has to face. The important principles involved in this problem are treated with numerous examples taken from actual cases. The difficult problems which arise in partners.h.i.+p and corporate accounting are fully explained.

Auditing is taken up from the business man's point of view rather than from the point of view of the pract.i.tioner. However, many points of interest to the pract.i.tioner and student are considered. The nature of the auditor's work is discussed and the different cla.s.ses of engagements which auditors undertake are explained.

The auditor renders a report on his work at the conclusion of his engagement and the form and contents of his report are treated at length.

The subscriber is shown the difference in certificates which auditors attach to balance sheets and the proper method of interpreting them is discussed.

FINANCIAL AND BUSINESS STATEMENTS

_Importance of cla.s.sified information_ _Statistical and graphical statements_ _Auxiliary statements_ _a.n.a.lysis and interpretation of income statements_ _Consolidated income statements_ _Valuation and interpretation of fixed a.s.sets_ _Valuation and interpretation of intangible a.s.sets_ _Valuation and interpretation of current a.s.sets_ _Valuation and interpretation of deferred a.s.sets_ _Treasury stock and its treatment_ _Interpretation of liabilities_ _Surplus, reserves and dividends_ _Sinking funds and other funds_ _Relation of working capital and income to a.s.sets_ _Consolidated balance sheets_ _Private budgets_ _Munic.i.p.al budgets_ _Interpretation of professional reports_

The business man must understand accounting as far as he uses accounting knowledge in interpreting the progress of his business.

He wants not so much the details of accounting technique as the information necessary to enable him to use his accounting records properly. No one can expect to succeed in a big way without the ability to read financial and business statements--both on the lines and between the lines.