No statement can be analyzed by rule of thumb. The points brought out in this chapter are by way of suggestion only. To many accounts, of course, they would not all be applicable. No unfavorable fact, however, is too unimportant to be overlooked and a competent manager is constantly adding to his knowledge and developing his power of drawing inferences and making deductions. At the risk of repetition the following questions are given and may be found helpful in realizing the varieties of causes which contribute to the formation of a borrower's credit standing.
Are the borrower's antecedents and character good?
Are his personal drawings from the business large?
Has he ever failed or had a suspicious fire?
Is he well liked and respected in the community?
Does he kite notes or checks?
Is he in good health? His age?
Is he what is known as a "rebater," a man who makes unfair claims for goods in the hope of getting rebates or other concessions?
Can reliance be placed on his statements?
What are his personal habits?
How does he spend his evenings?
Has he technical ability in his business?
Are his books properly kept?
Does he extend credit too freely or without discrimination ?
Does he cut prices ?
Is he careful and discriminating in the purchase of his stock or does he carry an unnecessarily heavy stock?
Is he inclined, to dabble in outside ventures such as real estate or stocks?
Does the business depend on conditions that may not be permanent?
Does he allow his machinery to become out of date and inefficient?
Does he study the particular wants of his trade with a view to meeting public demands?
Are his accounts receivable and bills receivable all genuine collectible accounts or are they padded with slow or worthless paper?
Does he take advantage of all trade discounts?
Are his sales out of proportion to his capital?
Is his position improving year by year?
Has he any large contingent liability?
Are all his liabilities given in the statement?
Are his profit and expense accounts in proportion to his sales?
Does he buy his raw material before he is reasonably sure of the amount of his sales?
Is he over-ambitious and anxious to extend his plant out of all proportion to his working capital?
Does he turn his capital quickly, or as many times as his competitors in the same line of business?
Does he always plan ahead in regard to his financial engagements, and know where the money is to come from?
Has he made provision for continuing his business in case of death?
Does he advertise wisely?
Is the line of goods he manufactures or sells one which is easily affected by changing fashions or seasons?
How do his annual sales compare with his stock on hand and bills payable and receivable accounts?
On what basis is the inventory taken and by whom?
Are his books audited by a chartered accountant?