Business Hints for Men and Women
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Alfred Rochefort Calhoun >> Business Hints for Men and Women
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At the end of every fiscal year, usually June 30th, the expenses
and the losses paid are deducted from the earnings and the net
gain may be divided as dividends.
Often there are not only no dividends, but a great conflagration,
like that of San Francisco, may wipe out all the earnings, all the
reserve and even the capital itself, leaving the company bankrupt
and heavily in debt.
Great calamities cannot be foreseen. No actuary has yet appeared
to forecast the acts of Providence, but on the whole our fire
insurance companies are well managed and prosperous.
ACCIDENT INSURANCE
We have insurance against storms, against the breaking of plate
glass and even against loss from burglars, but the best known of
the minor insurance societies are those known as "accident
companies."
Accident policies are of many kinds, and there is no reason why
the companies, under their charters, should not extend their risks
indefinitely.
Accidents against property are insured much as is destruction from
fire, but the nature of the accident as "hail," "explosions,"
"tornadoes" and "insect destruction" must be specified in the
policy.
The most popular form of accident policy is that which is sold to
travellers, and which can usually be had at the office where one
buys his ticket.
The method here is simple, and the purchase may be made in a
minute. "I want a policy for $1,000 for ten days," you say to the
clerk. He tells you the amount, you pay and get your ticket, and
there you are.
Prudent men have a stamped and addressed envelope ready. Into this
they push the policy, and the wife gets it. No, it does not
startle her. It is just Harry's prudence and she is used to that.
CHAPTER XXI
PARTNERSHIPS
If properly conducted, there is much to commend the management of
a business through partners.
Never go into a partnership with a man who puts in his experience
against your capital, unless you know him like a brother.
"It lasted about a year," said a man who had done this. "Now the
fellow, who has cleared out, has the capital and I have the
experience."
A partnership is an agreement between two or more persons to
associate for the purpose of carrying on a certain form of
business.
Each member of a copartnership must contribute a stated
contribution to the establishment of the enterprise, but each need
not give the same amount.
Neither is it necessary that the contributions of each to the firm
shall be of the same character.
One may contribute a building, another machinery, or material, and
still another money.
The shares in the profits are based on the cash values of the
different contributions.
The work of the different parties may be estimated as
contributions, but in such cases it is better to pay the worker a
fixed compensation, and charge this to the expense account.
PREPARE AND SIGN
Never go into a partnership based on a verbal agreement, unless it
be for the distribution of fish, game or nuts, when out with a
friend for a holiday.
Have the copartnership articles carefully drawn up and signed
before you put a cent into the undertaking. A document like this
can be appealed to should disputes arise; and should a partner
die, his heirs may find it of the greatest value.
The articles should contain:
1. The amount to be contributed by each.
2. The nature of the business.
3. The time which the partnership is to last.
If the time is not specified, a partner may withdraw whenever he
pleases.
If the profits are to be equally divided, this should be stated
and provided for.
SILENT PARTNERS
When a man invests money in a business in the management of which
he takes no active part, he is said to be a "silent partner."
Such a partner has a share in the gains and he is responsible as
the others for the firm's liabilities.
Again, a man may not give money or time to a firm, but is willing,
for business reasons, that his name shall appear as if he were in
the association. In this case the man is known as a "nominal
partner."
Although this man is not entitled to a share in the profits and
has no money invested, yet he can be held liable for the debts and
other obligations. The reason for this is very plain.
LIABILITY
In all matters rightly belonging to the business of a firm, any
member has the right to act, and his acts will be held binding in
law.
It is usual for partners active in a business to have each his
separate duties, but even if these duties be designated in the
articles of agreement, the outside business world is not supposed
to know anything about the relative duties of the members of a
firm as decided among themselves, so it is decided that each is
empowered to act for his partners.
Under the usual articles, it is stipulated that while a dual
partnership lasts, neither of the members shall make a note, sign
a bond, or enter on any outside obligation as an individual
without having secured the written consent of his business
associates.
Each partner in a firm is liable with the others for all the
business indebtedness.
If a firm fails, and the assets are found not sufficient to
satisfy the creditors, they can levy for satisfaction on the
private property of one or all of the partners.
If a member of a firm should become so far indebted, as an
individual, that he cannot comply with his obligations, the
interest he holds in the firm may be disposed of and applied to
the payment of his debts.
This does not mean that the creditors may take or seize on any
particular thing which the firm holds jointly, but that the
debtor's interest in the concern may be so disposed of. All this
the law has provided for.
A new partner admitted into a firm cannot be held responsible for
the debts of the old concern.
HOW TO DISSOLVE
Every partnership agreement must provide for and distinctly state
the period for which it is to continue.
At the end of the period named, the partnership is dissolved by
limitation.
If the partnership is to continue, a new agreement must be made
and signed.
On proper application, a partnership may be dissolved by an order
of the court.
If a member who has become objectionable to his partners should
not agree to a dissolution of the firm, the partners may apply to
a court of competent jurisdiction for a decree of dissolution.
No member of a firm can withdraw at his own option. The consent of
the other partners is necessary, and before he is released he must
provide for his share of the obligations.
Notice of dissolution should be published, and notices sent to
agents and others interested.
The following is the customary form of notice:
The copartnership heretofore existing
between John Smith, Harry Roberts and
Thomas Allen, under the firm name of
Smith, Roberts & Co., is this day
dissolved by mutual consent.
John Smith.
Harry Roberts.
Thomas Allen.
June 30, 1910.
SPECIAL PARTNERSHIPS
Limited or special partners are not recognized in some states.
This is a method of association whereby a person joins a
partnership, putting in a sum agreed on, and which he may stand to
lose as an investment. He is entitled to a _pro rata_ in the
profits, but he cannot be held for the debts.
In some countries marriage is regarded as a civil contract or form
of partnership, subject to dissolution by the courts.
CHAPTER XXII
INVESTMENTS
It is a remarkable fact that many men who have shown remarkable
shrewdness in conducting a business in which a fortune may have
been accumulated, exhibit the judgment of children when it comes
to making investments.
There are able lawyers who have made fortunes in the practice of
the profession which they understood, only to lose them by
investments in mines or other ventures, about which they knew
absolutely nothing but what was told them by the scheming
speculator and smooth-tongued promoter.
As has been intimated before in these pages, there is a great
difference between saving through and hoarding through a spirit of
miserliness.
SAVINGS
Every wage or salary earner, no matter how small his compensation,
should try to lay by something of that little as a provision
against the unproductive days.
No matter how small the amount a man has set aside, after paying
for life's necessities and meeting all just debts, he is to that
extent a capitalist.
The miser would hide his savings out of reach, but the man with
the foresight to save will usually have the judgment to place
these savings where they will fructify and grow, producing the
fruitage known as interest.
The young man or the young woman, or any one else who places his
little accumulations in a savings bank, has begun a form of
investment that may, if persisted in, place him or her above want,
even if it does not entitle either to a place on the lists of
great capitalists.
CAPITALISTS
The capitalist not only has money of his own to invest, but he may
and very often does need more money properly to exploit the
enterprises in which he is engaged.
Money loaned to such men, after being assured of their ability and
integrity, is an advantage to the lender as it is to the user.
The lender's profit is assured if the enterprise does not fail,
and the added capital not only insures against failure, but it may
enable the manager to succeed beyond any expectations he could
have if forced to carry on the work with only his own resources.
The capitalist may choose to buy land in the suburbs of a city and
build thereon a house to be sold or rented. This should always be
made to secure the money borrowed.
A capitalist may establish a fund from which, on good security,
the business men of the community may obtain loans, for which they
get a higher interest than that which they undertake to pay to
those whose money they are using.
Again a capitalist may undertake to loan to farmers, who have not
the means to carry on the work, but who are anxious to make their
lands more productive, through drainage and crop rotation. In this
case the money loaned is secured by the usual bond and mortgage.
Or it may be that another body of men is anxious to start a great
manufacturing enterprise in the neighborhood, but has not enough
money to place the venture on a paying basis.
In the latter case it appeals to the capitalist, and he, though
not bearing enough available means of his own, undertakes the work
with the knowledge that he can rely on the small investors, whose
contributions he has before managed successfully.
STOCKHOLDERS
Or it may be that the manufacturing company does not ask the
capitalist to assist, but itself goes to the small investor with a
prospectus of the enterprise, and offers to sell stock in the
concern at $50 or $100 a share, as the case may be.
This gives a chance to enjoy the profits, be they great or small;
but with the chance for larger profits there comes the greater
risk which must always be assumed in such cases.
Sometimes, when a company is starting, its stock may be put below
par. This stock, in the event of success, may appreciate, as with
some bank and other corporation stocks, many times above the par
value.
When stocks sell in the open market for their face value, they are
said to be at par.
KINDS OF STOCKS
Most companies, organized on a stock basis, issue stocks of two
kinds. One is known as "common" the other as "preferred."
As the name implies, preferred stock (its rate of interest is
always fixed) is entitled to be paid out of the net dividends
first.
Whatever is left after paying the preferred stock interest is
divided up equally among the shares of common stock, each getting
according to his holdings.
Sometimes the dividends on common stock are far greater than those
on the preferred. The preferred stock dividends are regarded as a
fixed charge, but there can be no limit as to the payments on the
common stock, if the funds are available.
The stocks of railroads, factories, banks and other enterprises
may be good forms of investment, and for this they are often held
for long periods by investors for revenue.
Most stocks, however, particularly of railroads, are continually
changing hands. The buying and selling of such securities has
grown to be an enormous business, managed largely by men known as
"stock brokers," many of whom are strong factors in the financial
world.
As a rule, the buying and selling of stocks through brokers is a
hazardous form of speculation, which has in it all the elements of
gambling, and we cannot advise too strongly against it.
There is another kind of stock, which some companies keep in their
safes to meet an emergency. This is known as "treasury stock,"
and, like the preferred, its rate of interest is fixed.
Let us suppose that a company is capitalized and prints stock to
the amount of $100,000.
This company sells $80,000 worth, and the officers believe that
they can force the enterprise to success with the money on hand.
Now, it follows that, with the same amount of earnings, the
profits on $80,000 will be greater than on $100,000, so the
$20,000 unsold stock is held in reserve.
If to extend the business, or for any other reason, it is
necessary to have more money, the treasury stock may be sold to
secure the extra capital.
If the business is placed on a basis where its success is beyond
all question, then the treasury stock may be divided _pro rata_
between the holders of the other stock, for, till disposed of in
some way, it was an asset common to the whole company.
Each stock certificate tells when dividends are declared; they may
be paid quarterly, half yearly, or annually.
CHAPTER XXIII
BONDS AS INVESTMENTS
The best way in which savings can be invested is to use them in
the extension of the business in which they were made.
The wage earner and the man on a salary cannot, of course, do
this, but the farmer, the small tradesman, and the mechanic, who
is his own employer, may be able to do so. And so, before looking
for a field for investment outside, such men should look about
them and consider how best the money may be used right on the
ground.
AS TO BONDS
But after considering the points suggested, the man who has some
money may not be able to find a secure and profitable place for it
in or near his own home. One of the safest forms of investments is
bonds, though, as with other forms of security, the rate of
interest declines as the margin of safety increases.
If a well-established stock company should wish for any reason to
increase its available cash, it may issue bonds, or certificate of
indebtedness, bearing from four to five per cent interest, payable
semi-annually.
These bonds may be transferred the same as stock. They are a good
form of security when it is desired to borrow money from the bank,
and for many purposes they are as available as so much cash.
Such bonds are issued for a specified number of years and have
coupons attached, which are cut off when interest is due, and
presented to the treasurer of the company for payment.
These bonds are secured by a mortgage or deed of trust on all the
property of the corporation they represent.
To redeem these bonds, when due, the company annually sets apart a
sum, known as a "Sinking fund," for their redemption.
Such bonds are far safer than any form of the company's stock, for
they bear interest that must be met, whether or not dividends are
declared.
As with a real estate mortgage, the property pledged in the bond
should be defined.
RAILROAD BONDS
Every railroad in the country has been built and equipped by the
sale of its bonds. In such cases amounts of stock of the same, or
approximately the face value of the bond, have been given to the
purchaser as a bonus or inducement. Of course, the controlling
stock is always retained by the promoters; and it is through the
representation of this stock that all the business of the
corporation is carried on.
The cases are few where any money was paid directly for the
original issue of any railroad stock.
Bonds sold to build a road are usually known as "construction"
bonds. There may be another bond issue for equipment--with a stock
bonus--and still other bonds, each series stating the property
pledged and the purpose for which the money from sales is to be
used.
The _Christian Herald_, in one of its recent financial articles,
clearly defines this species of bonds, as follows:
"Railroad bonds are usually pledged by the President and Treasurer
of the railroad and by the Trustees, to whom the bonds are made
out, and who must defend the rights of bondholders, should the
company fail to meet any of the obligations it undertook in the
mortgage deed.
"In other words, a bond is the Corporation's promissory note for
the money originally paid by the investor, with interest for the
same, to be paid to the investor in stated amounts at stated
intervals; and to guarantee its good faith in the matter, the
Company pledges the bondholder an interest in certain property in
its possession. It follows that a bond has a first call upon the
property rights of the corporation; that it represents something
tangible; that it pays a definite amount of interest, and that it
may be reduced at its full value at a certain time."
BUYING BONDS
Bonds, like wheat, have their selling prices quoted from day to
day, and they are equally a thing of purchase and sale.
There are banks and brokerage firms that make a specialty of
bonds, and most of these houses are entirely reliable; still, the
novice in such things would do well to investigate for himself
before investing in any bond recommended by any seller.
It is the purpose of the seller to sell; it should be equally the
purpose of the buyer not to be "sold."
Our government, state and municipal bonds speak for themselves,
and in the main require no examination as to the security, though
there have been cities and even states that have defaulted in
their payments.
Bond houses and banks of established reputation cannot afford to
deceive; they receive their compensation in the way of commissions
on sales, and their characterization of the bonds may be accepted
without question, for they invariably investigate the bonds,
before they lend their names to them by offering them for sale.
If there is any doubt in the mind of the would be purchaser as to
the character of the seller, that should be the first thing
investigated.
What the buyer must satisfy himself of is:
1. Who is the seller?
2. What do the bonds represent?
3. Are they negotiable? and
4. Can they be sold again for about their face value?
Every one who has saved money, it is to be supposed, has a bank
account and is acquainted with the president of his local bank.
When in doubt, the advice of such a man may be of great help.
CHAPTER XXIV
THINGS TO REMEMBER
If a man is making a living he should not change his business
after he has passed middle life, unless, indeed, he has a
guarantee that the new venture will be greatly to his advantage.
The best business for the average man is that which affords him
the most pleasure in carrying it on, or at least with which he is
most familiar.
Happiness in one's work means far more than the accumulation of a
fortune in discomfort.
DON'T DECEIVE YOURSELF
Having made your credit and business standing good, keep them good
by an adherence to the same course.
If you can avoid it, do not loan your name to every needy friend
that comes along. Your neighbors question your good judgment every
time you have to meet a note which you were coaxed into endorsing.
You would have saved yourself by loaning the money outright.
Do not deceive yourself into the belief that you are making money
when, as a matter of fact, you may be losing.
You buy an article for two dollars and sell it for two and a half,
and you say to yourself: "There is fifty cents made." But is it?
Let us see.
Before crediting your business with that fifty cents, you should
have considered these points.
1. The loss of interest on that two dollars.
2. Your own time or other time paid for.
3. The capital invested in things not sold.
4. The rent.
5. The transportation, insurance, heat, light, bad accounts,
unsalable goods, taxes, public donations, and the flood of items
that go to swell the outlay of every merchant, whether in the
great city or at the country crossroads.
WEEDING OUT
Every man in trade should make an inventory of his stock at least
once a year. Having done this, he should give his stock a fresh
appearance, whether new goods be added or not, by relegating to
the scrap heap, cellar or the garret all the dingy, dirty,
disreputable stuff that he could not sell or give away, and which
has induced sore eyes whenever seen.
Keep a stock book.
Quite as important as keeping the stock in order is keeping the
books in good shape.
At least once a year the books should be weeded out. Why carry as
bills collectable accounts which you have been assured, for years,
would never be paid?
Wipe them out and charge them to profit and loss.
Where machinery is used, it is a good plan to charge off every
year ten per cent of the cost; this to make good the loss from
wear and tear.
It is only by annual house cleanings and account clearings that
you can tell about how you stand.
LET YOUR WIFE KNOW
It is usually wise for a woman, married or single, to keep her
real estate and her money, if she have any, in her own name. So
also with property bought with her money.
In these cases the woman should deal with her husband, or the
members of her family, the same as she would with strangers with
whom she is transacting business.
Some may say that this suggests a want of confidence and a lack of
that affection that should exist between husband and wife or near
kinsfolk. Such an objection is sheer sentimentality. Be as open
handed and generous as you will with your loved ones, but when it
comes to business, let the work be done in a strictly business way
or not at all.
Many a good business has gone to ruin after the death of the owner
and manager because he had kept his wife in blank ignorance of his
affairs and the way in which he conducted them.
Many a business, that just dragged along till the death of the
manager, has sprung into new life when the widow took charge. This
must in part be credited to natural ability and inborn pluck and
energy, but even these gifts could not have availed if the woman
had been left in ignorance of business methods.
Women, like men, are awkward in new positions, not so much from a
want of ability as a lack of experience.
Put the average man suddenly in charge of a house, and he will
soon demonstrate his helplessness. The woman's deftness comes from
her experience.
As far as it is possible, every husband should post his wife as to
his methods of doing business.
He should not keep her ignorant of his financial affairs.
If he conceal from her the amount of his secure holdings, it may
be that he hopes to surprise her at his death, or long before that
event. But if he have any regard for his family, he should not
hide from her the obligations which may spell ruin if the wife is
not prepared in advance to meet them.
Whether the husband lives or dies, the wife must still care for
the children and attend to her never-lessening household duties.
Think of her as taking on the added burdens of a business of which
she is ignorant.
There are many prosperous husbands to whom what has just been said
will not apply, but if you should ask them the secret of their
success they will not hesitate to tell you that when they married
they took their wives into full partnership, business secrets and
all.
CHILDREN AND BUSINESS
When you send your children to school it is that the training
there received may qualify them to fight the better the ceaseless
life battle.
Of course, we should not regard all education from a business
viewpoint. Money apart, learning is its own greatest reward.
It widens the horizon at every step, and lifts the soul into
strength and a profounder worship. But it will not do to overlook
the business side of the training which the child should receive
in school and out of it.
It is all very well to teach children the sources of the family
revenue and the way to secure it. It is right that they should be
impressed with the dignity of labor and trained in the ways of
earning money, but it is far more important that they should be
taught how to spend money, so as to get the most good from it,
once it is earned.
The boy or girl is in a safe way to learn self-control and build
up character when he or she, with some nickels at command, can
pass a candy or a fruit shop without being compelled to spend
their cash assets.
Children, wherever it is possible, should be given opportunities
for earning money, which they can feel is "really and truly" their
own.
They should not be made to feel that the money is not actually
theirs, to do with as they please, but they should be taught self-
denial, and that they must not get rid of their earnings by the
purchase of things not needed.
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