Page:Hints About Investments (1926).pdf/139

 and paid out £70,000 and its position will be stated thus when the directors come to draw up the balance-sheet for public issue.

The amount of net profit finally shown will depend entirely on the view that the directors take about the figures to be put into the final balance-sheet against the items on the credit side apart from cash, which is a known quantity. Material may have fallen in value since they bought it and there may be much discussion as to whether it ought to be written down by io per cent., by 20 per cent. or by nothing at all. The machinery and plant, being brand new, some will argue that there is no need to write them down at all, while the more prudent will urge that their ultimate destiny is the scrap-heap, that the mere fact that they have done a year's work takes about 50 per cent. off their value for selling purposes and that a start ought to be made at once with the writing down process.

If compromise is finally reached on the basis of a 5 per cent. all round reduction in