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First, let me say that I enjoyed Professor Edmister's paper and found his inquiry into ratio analysis and multiple discriminant analysis (MDA) for small business financing decisions quite interesting. I would like to break my comments into two basic categories: a) the statistical methods utilized, and b) the policy implications of the findings. [ABSTRACT FROM AUTHOR]

In this article the author comments on the research paper related to the prediction of business failures using accounting data by Jarrod W. Wilcox. The author disagrees with Wilcox's claims that the paper really deals with prediction of business failures, feeling that it represents an autopsy of deceased firms. The author describes his conception of the logic of Wilcox's paper which is that it constructs an index of financial strength or financial stability for both firms and then makes the statement that the firm with the worse cash condition, as indicated by the index, is the firm which is bankrupt. The author believes that within the framework of Wilcox's work it is inappropriate to assert that his correct statements constitute predictions about bankruptcies, and that the character of his data and the nature of his design render such an assertion inappropriate and invalid.

The article discusses the wooden money of Citizens Bank of Tenino, Washington. On December 7, 1931, the Citizens Bank of Tenino closed its doors. This was only one of 1,055 bank suspensions in the fourth quarter of 1931. The issue of paper scrip has been resorted to by other communities under similar circumstances in order to stimulate local trade and hence was in no sense unique. When the bank closed, the buying power of the depositors was at once frozen. The receiver of the bank estimated that a liquidating dividend of 25 per cent could be paid within a few months. Thousands of autos pass through the town daily, especially during the tourist season. Every Main Street service station, hotel, and restaurant advertised wooden money. More than one gasoline tank has been filled or meal served in recent months because the tourist had heard of wooden money and wanted to obtain samples. The extent to which the community will profit from outside sales of wooden money cannot be determined until the liquidation is closed.

The article reports on the usefulness and function of financial ratios in predicting business failure and discusses the paper, "Financial Ratios as Predictors of Failure," by William H. Beaver. Beaver defines a business failure as having occurred with the events of bond default, an overdrawn bank account, and nonpayment of a preferred stock dividend. The author does not agree with this because bond defaults can be cured, bank overdrafts can be taken care of, and stock dividends can be resumed. He notes that Beaver mentions the ability of ratio analysis in predicting the possibilities of those events occurring before a business has actually failed.

Planning in Nepal has little to do with anything that happens in that country. Planned targets are not met. Planned expenditures are not made. This paper explores the reasons-insufficient information, few and poor project proposals, inability to program foreign aid, opposition of the finance ministry, and severely limited capacity to administer development-given for the failure of planning. Special attention is paid to the tortuous release of funds and the effort to overcome basic political and administrative factors through surface changes in the form of organization for planning. The author argues that planning cannot create the preconditions for its own success. [ABSTRACT FROM AUTHOR]

The article analyses the deposits by the individual banker, which is consider as a means of conducting a sound baking business. Business or commercial accounts result from borrowings by corporate and other enterprises which are negotiated through an exchange of business paper for bank credit. The bank's reserve problem is largely concerned with these since business accounts are fluctuating and active, highly sensitive to slight changes in business conditions and in public confidence. In the first place, not all business deposits result from borrowings by business enterprises. The larger corporations of the country have not been, generally spreading, greatly in debt to the banks for several years past, yet many of them have maintained large, often excessive, bank balances which would certainly be classified as business deposits. Business deposits are often highly sensitive to changes in public confidence. It is the savings and income accounts, on the whole, which have been withdrawn during this past year in large amounts, while business deposits have been much more stable. It should be added, however, that if bank failures continue on a wide scale, business concerns, as well as individuals, will be increasingly likely to withdraw their accounts and hold currency or gold.

This paper analyses in detail a system with an exponential reliability function and a constant repair time. It first presents the availability and its variance for a given number of cycles, a finite length of time, and a steady state. Then, it shows how the variance of the availability can be used to support an economic evaluation of start-up operations, presents some design criteria based on a total system cost model that includes a function of the availability (a down-time that is the complement of availability), gives optimal values of the mean time to failure and the mean repair time, and exhibits methods for a sensitivity analysis of these optimal values and of the total system. The paper concludes with a numerical example. [ABSTRACT FROM AUTHOR]

The high rate of new black retail ventures' failure indicates that present methods of fostering black capitalism are failing. This paper examines the present shopping patterns, attitudes, and preferences of ghetto residents, non-residents employed in the ghetto, and white residents from surrounding neighborhoods. Based on an analysis of the marketing environment, recommendations for a systems approach to ghetto retail renovation are made. [ABSTRACT FROM AUTHOR]

The purpose of this paper has been to suggest the need for and examine the efficacy of a bankruptcy predictive model in the railroad sector of our economy. Several characteristics of the nature and content of railroad data were discussed with the expressed interest of eventually developing an accurate predictive tool. Preliminary empirical results comparing bankrupt railroad financial ratios with industry averages for the pre-bankruptcy period were indeed encouraging. Financial data for failing railroads displayed significantly worse measures and their deterioration heightened as bankruptcy approached. Therefore, we feel confident that a multivariate model combining several of these financial measures with appropriate weightings (coefficients) could lead to a helpful unambiguous early warning system. [ABSTRACT FROM AUTHOR]

The article examines the effects of the principle of absolute priority (PAP) when applied under Chapter X of the U.S. National Bankruptcy Act. PAP describes how a bankrupt firm has its value assigned to various levels of creditors. The author presents empirical data for eight instances of corporate reorganizations that were consummated during the period 1941-1946. Analysis suggests that PAP does not always lead to an equitable distribution of value, with the interests of some creditors served at the expense of less senior creditors.

The concern of this paper is with the lack of rigorous investigation into the reasons behind the high rate of attrition among firms in the property-liability insurance industry. The research reported here will attempt to support the claim that the number of exits from the industry has been alarmingly high. Since the industry is an integral part of both the social and commercial structure of the national economy, it is hoped that the data presented will stimulate scholars and professionals to investigate creatively the question: ‘Are exit statistics analagous to the handwriting on the wall for the Property- Liability Insurance Industry?’ [ABSTRACT FROM AUTHOR]

In this article, the author tries to examine time as a factor in determining debt-paying ability. This consideration has led on to other related problems and considerations, and finally to a certain amount of experimental research in debt payment. It has seemed that in the great majority of cases the focal point of business mortality is the actual or prospective inability of a concern to pay its debts. If this simple hypothesis be accepted it seems that the financial health of a business may be measured in terms of the distance that a concern is from this focal point of mortality. As a corollary it would also seem that definite evidence of financial ill health is indicated when a business is unable to pay its debts when they are due. The author reports that in the great majority of cases even the most rigorous classification of current assets and current liabilities fails to reveal whether a business can actually pay its short-term debts when they are due because it does not indicate whether the realization of assets will be sufficiently rapid to meet the agreed liquidation dates of the liabilities.

Forecasting is unavoidable in economic research because administrative wheels grind slowly. It takes as many months to put through appropriations. The various committees likewise authorize changes in defense schedules slowly. Only an emergency would induce a President to call a special session. That is politically possible if business is in a tailspin, if unemployment is developing rapidly, bankruptcies rising and the stock market failing. The needs of the times would communicate to the President and Congress what had to be done. It is much less likely that the President would call a special session to combat inflation, if higher taxes were needed, say, to check a roaring excursion into overfull employment and a price boom which might ultimately degenerate into a business bust. Not only do differences develop about how to achieve maximum production and employment, but differences develop over the methods for detecting changes in the level and quality of business. Some economists study the behavior of business indicators, such as business failures, steel operations, new orders, sensitive commodity prices, new incorporations, paper board production, lumber production, housing starts and so on. By analyzing each series, they hope to detect declines or upturns in business early enough to permit government action to prevent either inflation or deflation. And among this group, there are differences over the relative importance of the so-called barometers.

While considerable progress has been made in the development of sophisticated statistical decision models, little attention has been paid to the problem of applying them in the "real world". This paper approaches one aspect of the necessary conversion process, namely the conceptualization and use of probabilistic data for decision making. Three points are demonstrated on the basis of clinical experimental evidence: (1) decision makers have difficulty conceiving of probability distributions, rather they are more comfortable with point estimates; (2) the concept of "risk of failure", the probability of failing to meet a perceived target, plays a major role in choice; and (3) the format in which probabilistic data are presented can affect choice behavior. A simple descriptive decision model is then developed, based on both the clinical evidence and two years of observation of a committee empowered to invest in new product development and product expansion activities. [ABSTRACT FROM AUTHOR]

In this article the author comments on the discussion of one of his papers related to the prediction of business failures by using accounting data. The author remarks that the source of variability presented in the discussion suggests that comparison across two matched-pair samples in terms of the nonpaired test is not reliable. The author compares Jerrod Wilcox's gambler's ruin model with William Beaver's model. Wilcox's gambler's ruin model analyzes two entities from the same industry, one, a business failure, and another, that will succeed. Wilcox's model was found to be a better forecaster than Beaver's.

This article discusses the response of the Australian accounting profession to company failures during the 1960s. The appropriate response of the profession to the criticism following company failures was, to R. A. Irish that of educating the public in the proper use and significance of public accountants. Some members of the profession, in papers at later conferences, engaged in postmortems on company failures, but evidently saw no problem in relation to accounting practices. The professional competence and integrity of the chartered accountant was, to Irish, without question the degree of chartered accountant was only earned after passing stiff examinations.

The article presents information on books and literary material related to general management. "A Bibliography of International Business," edited by Charles E. Stewart and George B. Simmons, is a bibliography of material on international business enterprises and foreign investment. Another book is "Corporate Planning Today for Tomorrow's World Market," by Business International. In the book consumers, markets, products, and political and business environments of the future are pictured and ways of organizing and planning to sell profitably under the conditions are laid out. The experiences of some companies are included. In "Investment Opportunities," investment possibilities in 87 countries in Latin America, Africa, the Middle East and Asia are listed. Covers 40 Industries, ranging from small business to integrated steel mills. "The Gamut of Inter-corporate Charges," is a checklist of 51 services rendered by parents to subsidiaries, which may be the basis for inter-company charges. "Thumbs Down on Foreign Trade," is an original Business Abroad survey of over 500 manufacturing companies in the Midwest on their international operations.

The article examines a theory of financial ratios and measures for predicting business failure in an attempt to expand upon and improve a forecasting model that was created by William H. Beaver. A sample calculation of a standard Markov process probability model is presented. The author claims that his model is more realistic in that it takes into account factors such as market entry and management. Another formula is presented that directly compares Beavers model to the author's and that looks particularly at drift rate.

The article discusses the state of the marketing concept in business. The marketing concept is defined as a strategy of creating a corporate culture in which all employees are in tune with market and consumer needs, and are focused on profit rater than sales volume. The author suggests that a number of companies encountered a variety of problems upon implementing the concept, including organizational stress, excessive costs and increased rates of product failure. According to the author, companies should assume more responsibility for consumer welfare.

The article discusses the "adequacy" of retail shopping centers in inner cities. The author defines "adequate" as relating to the physical presence of stores, their assortment of merchandise, their cleanliness and their personnel. According to the author, the commercial structure of neighborhoods in inner cities proved to be an effective way to evaluate consumer's alternative choices in terms of shopping locations. Also discussed were the rates of the start-up and failure of retail stores, as well as variables surrounding consumer preferences of stores not covered by this study, including size of the store, store hours and racial character of personnel. INSET: The Political World and Corporations....

Because of the reluctance of marketing men to publicize failures, there has been a tendency for managers to avoid the analysis of the possible effects of wrong decisions in the marketing process. Yet these wrong decisions can easily cause failure of the entire enterprise. This article sets forth a positive way to deal with the negative aspects of marketing decision making. The author presents a framework for the analysis of market risk in such a way that the reader can appreciate the dual nature of marketing decisions, the risk element as well as the profit element. In this way the possible effects of both good and bad decisions can be seen clearly before the initial action us taken. [ABSTRACT FROM AUTHOR]

How can concept testing be used to reduce the risk of advertising failures? For which specific purposes is concept testing well-suited; for which is it ill-suited? The author examines the logic of four specific rationales and techniques, and provides some interesting answers. [ABSTRACT FROM AUTHOR]

The article discusses small business failures in the retail trade industry, particularly focusing on grocery stores in Pittsburgh, Pennsylvania and Buffalo, New York. The author reports that mortality rates for these small businesses are extremely high, due in part to low market entry cost and high levels of competition. Other factors include the impact of the depression, and consumer habits which have changed towards one-stop shopping and the growth of supermarkets. The study's procedure is described; it involved tracking grocery store addresses on a yearly basis. The market entry rate, business mortality rate (market exit) and overall numbers of business operating between the years 1919-1941 are evaluated.

The purpose of this research is to test the usefulness of financial ratio analysis for predicting small business failure. Altman [1], Beaver [4] and [5], and Blum [6] have advanced empirical research of financial analysis in recent years by applying sophisticated statistical techniques to financial data of firms that became bankrupt or otherwise failed,and firms that appeared successful. Their research has indicated that analysis of selected ratios is useful for predicting failure of medium and large asset-size firms. However, these and previous studies have largely ignored small businesses because of the difficulty of obtaining data. [ABSTRACT FROM AUTHOR]

The article focuses on the paper "Discrimination: The Essential in Making Investments Abroad," by Robert B. Shaw, published in the November 21, 1959 issue of "The Magazine of Wall Street." The paper analyzes why some U.S. companies succeed abroad while others do not.

The article discusses profit maximization in advertising. The author attempts to distinguish between advertisements (ads) that will work from those that will not. In his opinion, ads fail for four distinct reasons. First, some advertisers don't set clear goals in advance. Without an achievable objective, success cannot be measured. The second reason he believes ads fail is because of a breakdown in the ad's message. The message conveyed must be relevant to the product, differentiate the product from the competition, contain at least one consumer benefit, and be believable. Another reason is that few advertisers are making use of knowledge about market segmentation and purchase concentration. Finally, he feels ads fail because too few advertisers give their ads enough exposure.

This article features the history of Manchester Labour Press Society Ltd. The British publishing firm contributed in no small way to the flood of books and pamphlets proclaiming socialist policies and offering socialist solutions to the problems of society. It was in existence from 1892 to 1901 and during that time not only printed and published work of surprising quality compared with the productions of other firms, but also published some rather avant garde material which the normal publishing trade would not touch. By 1894 the management were apparently feeling confident. The balance sheet and financial report published in the Clarion on 21 April 1894 records a tremendous increase in business and continues, so far the progress has been phenomenal and judging by the help given, they feel sure that a society has a most prosperous future, both as a Labour landmark and a true Cooperative Productive Society. So far the story is one of continually expanding business; but in the space of another four years, Harry Henshall, managing director of the Typographical Association, was bankrupt and the firm in voluntary liquidation with the accounts, on June 11, 1901, showing a net deficiency of 2,080 pounds.

The article focuses on the collapse of the British firm City Equitable Fire Insurance Co. and its associates in February 1922 which led to one of the most significant actions in British company law. The case revolved around the culpability of the directors and auditors for neglect in permitting the chairman of the company, Gerard Lee Bevan, to commit fraud on a fairly impressive scale. The parties concerned in the case were able to escape penalty through the loophole of an exclusion clause in the company's articles of association, a loophole closed by Section 205 of the Companies Act 1948. Bevan, however was sentenced to seven years penal servitude for fraud. The article details the events leading to the collapse and the extent to which Bevan manipulated the resources placed at his disposal.

Presents updates related to current events in the U.S. Mass meeting held by the colored people in Missouri to consider the Civil Rights decisions of the U.S. Supreme Court; Business failures according to commercial papers; Reduction of letter postage in 1883.

Presents a case history of the failure of a corporate department due to mismanagement. Inefficiency and incompetency of the department's manager; Failure to manage the department's personnel properly.

Discusses the need for setting up a company strategy to cope with a business downturn. Development of a marketing strategy; Application of the basic equation of business; Use of a zero base review as a regular budgeting technique; Need to control and limit expenditure.

Double liability for bank shareholders was first employed in the United States primarily as a protection for noteholders. Such provisions were to be found in early bank charters and statutes, but until the passage of the National Bank act in 1864 this means of safeguarding creditors was not generally used. After the passage of the National Bank act, with its inclusion of double liability, the principle was much more widely used in state regulations, and protection was designed chiefly for depositors. By 1910, 32 states had multiple liability provisions, and in 1930, 38 states. The numerous bank failures since 1930 have demonstrated the inadequacy of double liability as protection for depositors and have resulted in the removal of this requirement from the National Bank act and from the laws of 19 states. The trend today is toward such substitute means of protection as deposit insurance and the accumulation of greater surpluses. [ABSTRACT FROM AUTHOR]

The article focuses on the failure of banking institutions in the U.S. It must be understood that the term "failures" as published by the comptroller of the currency includes banks which are actually found to be insolvent, and embraces only those for which receivers are appointed. This includes those national banks for which receivers are appointed after having been voted into voluntary liquidation under the provisions of Section 5220 of the United States Revised Statutes. In other words, it frequently happens that a bank is absorbed by, or consolidated with, another bank without any suspension of business in so far as the depositor is concerned. Notwithstanding this, it may actually have been insolvent and, if so, is classed as a failure by the supervisory banking authorities. Some of these banks are reopened later or are taken over by other banks, and in many cases are not ultimately classed as failures. The "reopenings," as published by the Board include the suspended banks which have resumed operations. A resumption of operations may be attended by a change in name and an issuance of a new charter and still be classed as a reopening rather than a primary organization.

This article examines the economic factors involved in selecting a retail store site. A common cause of business failure among retailers is the selection of the wrong store location. Store location can be used as a competitive advantage since each store location is unique. With larger investments per store due to rising land and building costs, the selection of the right store location is important. However, the amount of time and money presently spent on store location research by retailers is small compared with the long-run effects of the decision. Retail sales in the U.S. have closely paralleled the density of population. For example, approximately 70 percent of the population live in urban centers with 78 per cent of retail trade taking place in these areas. Population data are important in selecting a retail site. However, the permanency and success of a retail store depends on many other factors, including the store's location in relation to the region and the state, its situation within the community, its location on the street or in the shopping center, the characteristics of the community and trading area, and the building, fixtures and equipment that are available.

Examines the weakness of industrial and financial organization in Great Britain by focusing on the failure of a country bank in the nineteenth century. Report that the bank was financed by profits from a boot and shoe business owned by the same family; Report that unlimited liability and mismanagement at the bank precipitated the liquidation of the manufacturing firm; History of the Kettering Bank in Great Britain, run by Thomas and John Gotch in the nineteenth century; Bankruptcy faced by Gotch & Sons in 1857 due to abuse of credit and over-trading; Practice of holding deeds as security against a mortgage; Discussion of the virility of family business during the industrial revolution in England.

This article examines the insolvency statistics in business failures in England as of 1965. In countries where the legal systems are founded upon the common law of England, there is a marked similarity in the structure of the legal processes for the recovery of debts. Some of these processes are of general application, but others are commonly believed to be particularly associated with business failures, and economists have used the statistics of these processes as evidence to support assertions about changes in the structure of industry and the nature of business cycles. In England and Wales, the law relating to insolvency is not unified. Individuals and partnerships are subject to the Bankruptcy and the Deeds of Arrangement Acts. The latter Act is intended to allow individuals and partnerships to make compositions with their creditors without incurring the stigma of bankruptcy. Companies, large partnerships, and some other associations, are liable to be wound up under the Companies Act. There are other legal processes which do not feature in the insolvency statistics but which may result in a business ceasing to operate. These processes are initiated only by individual creditors and are carried out without regard for the claims of other creditors.

The substance of this article is presented as a test of the hypothesis that inadequate bookkeeping is causally related to business failure. Lest the word causal result in the raising of eyebrows, the author hastens to explain that this word is used merely in the sense of an investigation into whether there exists a concomitant variation between adequacy of records and survival or non-survival in business. No study of business failures within the past five years has been complete without statistics on the proportion of bankrupt firms keeping adequate records of account and no lists of causes of bankruptcy has been complete without inadequate records as one. This is partly because it seems somehow meaningful, in a field so chaotic and so theoretically undeveloped, to present all factors that come to mind and are countable. It is partly too, because the bankruptcy act sheds a legal significance upon the subject by asserting that the judge shall grant a discharge unless the bankrupt has failed to keep books of account, or records, from which his financial conditions and business transactions might be ascertained; unless the Court deems such failure or act to have been justified under all the circumstances of the case, an assertion which at present carries with it little more than formal legal consequences.

The article focuses on the failure of the city of the Glasgow bank. Recent bank closings recall the history of the City of Glasgow Bank, which closed its doors a little over half a century ago. The last balance sheet published before the closing was dated June 5, 1878, and indicated capital reserves and undistributed profits totaling £1,600,000. The accountants' examination, made immediately after the closing of the bank, three months later, revealed that the capital and reserves were entirely wiped out, and that there was a deficiency of capital estimated at the astounding figure of £5,190,000. The immediate arrest of the bank's directors was ordered. During the five years preceding the dosing of the bank, between fifty and sixty percent of the total of advances on credits, discounts and overdrafts represented the debt of eight firms and the bank's directors. The City Bank failure once more brought up the question of the desirability of the acceptance by the Scotch bank of the principle of limited liability to stockholders as a measure of protection against disastrous situations comparable to that resulting from the City Bank failure.

Summary When an expensive piece of factory machinery fails to do its job efficiently, no time is lost sending a crew of mechanics to repair it as quickly as possible. When a machine breaks down repeatedly, it is usually discarded, with a resultant loss to the plant of perhaps tens of thousands of dollars in investment, spoilage of raw material and time lost. When a man in a responsible position fails to do his job efficiently, no crew of mechanics can rush to the scene, repair kits in hand, to restore his efficiency. When his failures continue over a period of time, the man, too, like the machine, must be discarded with a resultant loss to the plant of perhaps tens of thousands of dollars invested in his training for the responsibility of an executive position. No wonder industry today is gravely concerned over the failure of men who have been placed in management positions and whose failure, after a period of time, has cost the company heavily. At the beginning of this study, questionnaires were sent to 300 major executives in American industry asking each executive to consider one man whom he had appointed to a management position and who had failed in that position. The items in the questionnaire were roughly grouped into two categories. Results of analysis of the responses indicated that 'personality factors' were more important as causes of executive failures, in comparison to 'knowledge lacks,' in ratios of two to one in terms of frequency of checked items as well as in terms of weighted ranks; and in ratio of eleven to one when the respondents were asked directly which was more important. In general, the findings are similar to earlier studies of the causes of failure of lower level employees-clerical, and semi-skilled workers. [ABSTRACT FROM AUTHOR]

A problem of determining the form of optimal replacement policies is treated. Equipment whose changes of state can be described by a finite Markov chain are considered. The objective of the replacement policy is the maximization of the expected time between replacements while keeping the probability of an in-service failure below a specified bound. It is shown that, if the equipment "ages," a replacement policy of simple structure called a randomized control limit rule will be optimal. Such a policy can be determined by linear programming. [ABSTRACT FROM AUTHOR]

A general model has been developed for a class of business games to represent the activities of individual firms in a hypothetical oligopolistic industry. Although hypothetical, the games allow the players to transfer mentally to the real business world. The players who act as competitors build and operate their individual plants with specified technology to produce a single homogeneous product. The product is sold competitively to households, and labor supplied by the households is employed in the industry through competitive bidding of the competitors. Thus, there are two competitive markets established, with the firms competing for a limited supply of labor on the one hand, and competing for a limited sales fund on the other hand. Managerial decisions for each firm include labor employment offerings and wage rate, product sales offerings and product prices, production and inventory, plant expansion, money borrowing, sales credit, and dividends paid to stockholders. In some cases there is a market for "efficiency units" used to improve technology. The competitors may select wage rates and product prices freely, since there are no internal relationships in the model. Aggressive competition for labor results in increasing wage rates and aggressive competition for the sales fund results in low product profit. Various regulations are introduced concerning monopoly, taxation, credit, and bankruptcy. The general results of this study show that managerial behavior in an oligopoly exhibits varying strength of agressive competition producing the usual business cycle, and further that competitors will act to "stabilize" the industry by self-regulation of speculative activities. An examination of the technological input to these business games shows that competitors will invest funds to improve efficiency only when their marginal utility of money is well below that represented by the fixed interest rate. [ABSTRACT FROM AUTHOR]