Again, referring to these balance sheets, let us compare the net worth of these classes of borrowers:

Manufacturers show net worth 73 per cent of their assets.

Commission men show net worth 50 per cent of their assets.

Jobbers show net worth 60 per cent of their assets.

Retailers show net worth 64 per cent of their assets.

From the face of this statement the manufacturer maintains an eminently satisfactory margin behind his loans, and what we will want to know in the future is that this claimed margin is conservatively valued.

Let us now examine into the gross sales which tell the tale of the entire managerial activity, the mobility of the quick or working capital:

Manufacturers, gross sales per $1 quick assets

$3.30

Commission men, gross sales per $1 quick assets ..

3.60

Jobbers, gross sales per $1 quick assets.......................

2.25

Retailers, gross sales per $1 quick assets.............................

2.33

Here we are face to face with the most telling factor against a hard and fast credit test, in that the wide difference in results in the various lines of business are brought out. How can a uniform credit test be applied to such widely varying lines of business?

Of equal importance in showing the variations in different lines of commercial enterprise are the figures comparing the gross business done per $1 of total assets, representing as it does the total investment in plant and working capital:

Manufacturers, gross sales per $1 total assets.....

$1.60

Commission men, gross sales per $1 total assets ...

3.45

Jobbers, gross sales per $1 total assets.............................

2.08

Retailers, gross sales per $1 total assets...........................

1.82

Failure of Uniform Credit Tests.

Becoming more specific in our inquiry we may also come to the conclusion that if a uniform credit test fails, when applied to various lines of business, such as manufacturing, jobbing, etc., it will also fail when applied to various branches of the same line of business.

The following figures taken from the twelfth census of the United States will illustrate the wide variations among manufacturing interests. In 1900 the census report, covering the various branches of the manufacturing division of commercial affairs showed a proportion of working capital to total capital as follows:

Number Concerns

Per Cent.

Food products .. .

61,302

Working cap.

46 Total cap.

Textiles.....................

30,048

" "

54 " "

Iron and Steel...

13,896

" "

50 " "

Lumber.....................

47,079

" "

45 " "

Leather....................

16,989

" "

72 " "

Paper and pr'nt'g

26,747

" "

40 " "

Liquors......................

7,861

" "

41 " "

Chemicals.................

5,444

" "

51 " "

Clay, glass, etc..

14,809

" "

37 " "

Metals.........

16,305

" "

52 " "

Tobacco....................

15,252

" "

76 " "

Vehicles for land transportation .

10,113

" "

53 " "

Shipbuilding ....

1,116

" "

45 " "

There will be noted a fluctuation from 37 per cent to 76 per cent and the entire industry averaged 48.8 per cent, these variations emphasizing the futility of uniform credit tests.

The census report also gave some interesting facts regarding the fluctuations in the gross business per $1 working capital and $1 total capital as shown below:

Gross Business

Gross Business

Number Concerns.

Per $1 Working Cap.

Per $1. Total Cap.

Food products ....

61,302

$5.22

$2.42

Textiles.................

30,048

2.24

1.20

Iron and steel..

13,896

2.83

1.17

Lumber.................

47,079

2.40

1.09

Leather.................

16,989

2.35

1.17

Paper and printing

26,747

2.70

1.09

Liquors

7,861

1.96

.79

Chemicals

5,444

2.17

1.11

Clay, glass, etc.

14,809

2.28

.88

Metals

16,305

3.52

1.88

Tobacco

15,252

3.02

2.28

Vehicles for land transportation

10,113

2.42

1.21

10,118

2.42

1.21

Shipbuilding

1,116

2.14

.97

Average

$2.70

$1.32

Observing this it will be noted that the gross business per $1 of working capital varied from $1.96 to $5.22. The gross business per $1 of total capital varied from 79 cents to $2.42. Does this not further emphasize the fact that lines of business should be judged-strictly on their individual merits, rather than by hard and fast rules?

It would be interesting, if we had time, to compare many of the branches of these industries which vary even more widely than the grand division of manufacturers. Every consideration seems to impress the fact that one of the cardinal and fundamental principles of credit science must be accuracy in all the term implies. This forces us to the conclusion that the 50 per cent credit rule as regards quick assets to liabilities will not long be the chief factor in fixing upon the responsibility of borrowers in the light of the variation among the various classes enumerated. The time is coming when we shall be compelled to secure information which is accurate and reliable, and which has behind it the weight of certification and proof.