This section is from the book "Business Finance", by William Henry Lough. Also available from Amazon: Business Finance, A Practical Study of Financial Management in Private Business Concerns.
Financing is, perhaps, the least understood subject in the field of business, not even excepting accounting. A great many men have proved themselves able and successful as producers, organizers, and sellers, but have failed utterly in handling their financial problems.
A conspicuous example was the late Mr. George Westing-house, the brilliant inventor, organizer, and salesman who founded the Westinghouse Electric and Manufacturing Company, the Westinghouse Air Brake Company, and other enterprises. Mr. Westinghouse made a success of every business enterprise he touched except in so far as financing was concerned. He apparently was not familiar with financial methods and did not possess the foresight to keep his enterprises properly provided with cash as they progressed. Consequently, he was twice faced with serious embarrassment and in the end was compelled to relinquish the management of the Westinghouse Electric and Manufacturing Company.
This case is not an uncommon one. In fact, it is quite generally true that men of an optimistic, emotional turn of mind who make good as producers and salesmen are just the men who deceive themselves as to their own financial affairs and often wreck a promising business on some financial reef.
It is surprising to find how many directors of important corporations give insufficient attention to the basic financial problems of corporate business. Frequently insolvency, which should have been clearly foreseen, comes upon a board of directors when they fancy their company to be at the height of prosperity. This was true, for instance, of the insolvencies during recent years of the National Cordage Company, the American Malting Company, the National Asphalt Company, the United States Realty Company, the New England Cotton Yarn Company, and the Westinghouse Electric and Manufacturing Company.
Among smaller concerns the amount of ignorance regarding financial management is even greater. Every experienced business man probably has observed instances where profitable enterprises were half developed and then abandoned for lack of funds, when, in nine cases out of ten, the whole financial process might have been figured out in advance and the necessary funds raised with little difficulty. Instead, the enterprise too often drags out a painful existence for a few months or a few years, eats up the owner's capital, and at the end leaves him a poorer, but not always a wiser, man.