Page:Hints About Investments (1926).pdf/128

 It is a nice strong, mellow balance-sheet, worthy of the generous beverage that has built it up. Looking at the liabilities first, let us note the most important feature on the debit side of this and every other balance-sheet. It has been said that the capital and reserves of a company are owed by it to its shareholders. Such a debt is evidently on a different plane from debts owed to outsiders, and the first thing to be noted is the proportion of outside debt to shareholders' claims.

The outside claimants (debenture holders and creditors) against Messrs. Bass are owed £3,843,000 out of a total of over £8,613,000 millions; so that if the company went into liquidation and the assets realized the values placed on them, there would be £4,770,000 to be divided among the shareholders. The preferred shareholders having been paid off at par, there would be £3,410,000 for shareholders, the face value of whose claim is only £2,040,000, giving them an apparent bonus of £1,370,000 among them. This increment, however, is by no means "unearned," being exactly accounted for by the Reserve Fund, accumulated out of past profits, and the Profit and Loss balance of £420,000 which belongs to the shareholders on the assumption that there were, at the date of the balance-sheet,