DR. FRANK CRANE’S DAILY EDITORIAL

Sun (Auckland), Volume I, Issue 208, 22 November 1927, Page 5

DR. FRANK CRANE’S DAILY EDITORIAL

RULES FOR INVESTORS (Copyright, 192 7) JT is about as hard to keep your money safely as it is to make it in the first place. It requires almost as much care, ingenuity and foresight as it does to earn the money. Joseph R. Nutt, president of a huge trust company, has given us list of questions which an expert analyst would want answered before reaching a decision about a bond. By the way, one question a friend of mine who has large meansaid he was always asked about a bond was, "Will the bank buy it?” If the bond wasn’t good enough for a bank it wasn’t good enough for him. Mr. Nutt’s questions are as follows: What is the corporation’s earning record? Have the earnings been analysed? Sometimes a sufficient allowance has not been made for maintenance and depreciation, although the earnings of the company amount to more than their interest charges. What is the company’s financial condition? How much of the assets are inventory? Have the company’s books been audited? Sometimes without auditing, the books may show a company to appear more prosperous than it really is. What is the character of the company's business, competition, etc? One of the most important questions is, how well is the company managed? Have all necessary legal precautions been taken? If the principal and interest guarantee, what does that guarantee amount to and is it enforceable? To what purpose is the issue? Will the borrowing purpose be fulfilled? Are future bond issues restricted? Can the company redeem its bonds upon maturity? Is a sinking fund necessary? What are the precautions regarding taxation of the bonds? Is the property free from liens? Is the income return in keeping with general market conditions? Investing has become a science. If you are untrained in it, ycu can hardly depend upon your own judgment. It is better to submit it to an investment house or a bank in whoa you have confidence, —— : —