Table Of ContentOther Titles of Interest
DAVIS S. M.
Managing and Organizing Multinational Corporations
DONALD A.
Management, Information and Systems
DUBRIN A. J.
Casebook of Organizational Behavior
EILON S.
Aspects of Management
Management Control
GOLD B.
Technological Change: Economics Management and Environment
HUSSEY D. E.
Introducing Corporate Planning
IBRAHAM I. B.
Readings in Managerial Economics
OWEN T.
The Manager and Industrial Relations
BETWEEN THE LINES
OF THE BALANCE SHEET
The plain man's guide to published accounts
by
MICHAEL GREENER
Second Edition
PERGAMON PRESS
OXFORD · NEW YORK · TORONTO SYDNEY · PARIS · FRANKFURT
U.K. Pergamon Press Ltd., Headington Hill Hall,
Oxford OX3 OBW, England
U.S.A. Pergamon Press Inc., Maxwell House, Fairview Park,
Elmsford, New York 10523, U.S.A.
CANADA Pergamon of Canada, Suite 104, 150 Consumers
Road, Willowdale, Ontario M2J 1P9, Canada
AUSTRALIA Pergamon Press (Aust.) Pty. Ltd., P.O. Box 544,
Potts Point, N.S.W. 2011, Australia
FRANCE Pergamon Press SARL, 24 rue des Ecoles,
75240 Paris, Cedex 05, France
FEDERALREPUBLIC Pergamon Press GmbH, 6242 Kronberg-Taunus,
OFGERMANY Pferdstrasse 1, Federal Republic of Germany
Copyright © 1980 M. Greener.
All Rights Reserved. No part of this publication may
be reproduced, stored in a retrieval system or transmitted
in any form or by any means: electronic, electrostatic,
magnetic tape, mechanical, photocopying, recording or
otherwise, without permission in writing from the
publishers.
First edition 1968
Second edition 1980
British Library Cataloging in Publication Data
Greener, Michael
Between the lines of the balance sheet.
2nd ed. — (Pergamon international library):
1. Balance sheets
I. Title
657'. 3 HF5681.B2 79-40910
ISBN 0-08-024071-2 (Hard cover)
ISBN 0-08-024072-0 (Flexicover)
Printed and bound in Great Britain by
William Clowes {Beccles) Limited, Beccles and London
to my father
Preface to the Second Edition
WHEN asked in 1978 to revise, if only marginally, a book written in 1966
I was filled with misgivings. Twelve years is a long time in economics.
However, although facts and figures have a habit of changing rapidly
from one year to the next, ideas and attitudes tend to endure. Most of
modern philosophy is little more than a confirmation of the adage that
there is nothing new under the sun. The greater part of it is fairly easy to
find, albeit differently presented, in the writings of the ancient Greeks.
This book is by no means a philosophical treatise, it is merely a
discussion of the ideas underlying accountancy and its application to
investment decisions. None the less it is concerned with basic concepts
and these, it seems, are not prone to sudden shifts.
Had space allowed it would have been instructive to explore the
extraordinary contrast, at least in the medium term, between the
manufacturing and distributive sectors of industry in this country. The
disparity in rates of return seems to underline the claim that Britain is,
and possibly should continue to be, a nation of shopkeepers. Even in the
area of inventions we seem to profit more from their sale than their
development — though the reason is doubtlessly attributable to our lack
of the space, the money and the natural resources to develop them.
As explained in the introductory chapter the time and trouble that
would have been incurred in replacing the figures taken from accounts
dated in the early 1960s with similar figures from the late 1970s would
have had no noticeable effect on the arguments which those figures were
used to support. They have therefore been left unchanged, though
current figures have been introduced in the new chapter where a point
seemed to need underlining.
Finally, may I express my gratitude to the companies included in the
text for the help they have afforded — particularly those which now own
ix
x PREFACE TO THE SECOND EDITION
or represent the few corporate bodies that have ceased to exist as
separate entities since 1963. I must also afford space to thank Corrie
Coughlan and Pauline Thomas for the time they gave to all the necessary
retyping and to my son, Matthew and his friend Jay for help with the
proofs.
Michael Greener
Barry, 1979
Preface to the First Edition
THE reason for this preface is the obligation on my part to acknowledge
in some permanent manner the help received from so many persons in
the writing of this book. Much was of that indirect kind that is not
always apparent to those who provide it. There were many such people:
friends, acquaintances and comparative strangers. If I do not mention
each by name it is for reasons of space, not absence of gratitude.
As for specific assistance, the donkey work was the responsibility of
three people: Jean Thomas, who made a superb job of the typing from
handwriting that was almost unreadable, and Barbara Harvey and
Angela Tarling who ploughed through the calling over, a tedious
business. The latter, in addition, acted as an unpaid secretary and
organising genius.
The book was read by three people: Mr. John C. W. Day of the
College of Commerce, Wednesbury, Mr. Michael Quinn and Mr. Gwyn
Ingli James of Cardiff University. Mr. Gwyn James took on the
formidable task of correcting the worst of my punctuation. He also tried
unsuccessfully to dissuade me from some obscure grammatical con
structions; for these he takes no responsibility. His greatest contribu
tion, however, was probably founded in a long friendship and showed
itself in continual encouragement and a willingness to listen to tales of
woe and weariness.
My wife took the brunt of my temper throughout the period, in
addition to having the living room littered with a multitude of accounts
and working papers.
Perhaps it is only fitting that the final remarks should be reserved for
the place wherein the book was originally conceived. The years spent at
Wednesbury were probably the most intellectually rewarding of my life,
apart from being the happiest. It is impossible to single out individuals
xi
XÜ PREFACE TO THE FIRST EDITION
without seeming to show a preference not necessarily felt. However, it is
essential that I mention the names of Mr. E. George Smith and Mr. Eric
Cockson-Jones, two men as different as those in the preface to Hills and
the Sea, yet whose acquaintanceship, or rather friendship, has been a
singular source of strength, both in the times we lectured together and
since. Those days were truly memorable. They were followed by a long
period of ill health — also memorable in a rather different way. It was
during convalescence from this that the book was written.
Michael Greener
Barry, 1968
An Introduction (with hindsight) to the Second
Edition
SINCE this book was first published just over a decade ago there have
been many changes on the industrial scene. There have been two new
Companies Acts and a considerable revamping of fiscal legislation
concerning the taxation demanded of corporate bodies. The United
Kingdom has also become, not without much heart-searching, a full
member of the European Economic Community. None the less, despite
all these legal and commercial commotions and volte-faces; the basic
arguments and themes discussed in this book and the conclusions drawn
need very little revision. The figures used for illustration may seem a
little out of date but the arguments that they illustrate are as relevant and
topical today as they were when first put forward.
The fact that three of the eight companies initially selected for
scrutiny have ceased to exist as separate businesses is symptomatic of the
industrial centralisation by way of mergers, acquisitions and
amalgamations that has been much in evidence over the intervening
period. The gobbling up by larger groups or by the State of the three
companies referred to, namely William Hancock Ltd., The Lancashire
Cotton Corporation and Harland & Woolf Ltd., is indeed consistent
with many of the observations made in the text. The Lancashire Cotton
Corporation was shown to be in possession of a high proportion of
liquid assets — resources which were no doubt welcomed by Courtaulds
Ltd., a highly successful company in the textile world, which bought the
complete capital of the Corporation shortly after the book was written
and, in fact, prior to its publication. Today, The Lancashire Cotton
Corporation is still registered as a company but no longer trades as one.
Harland & Woolf, the Belfast Shipbuilders, stand out prominently in
xiii
xiv BETWEEN THE LINES OF THE BALANCE SHEET
each chapter as a company in straightened circumstances. Conditions
did not improve in the years following and had it not been for the
substantial amounts of money provided by Parliament at Westminster,
which regarded the continuation of business in such a high employment
industrial sector as an over-riding consideration, the company would
never have survived. Between 1966 and 1974 it received state aid in the
region of £68 million (six times the 1977 share capital and almost five
times the average capital employed for 1963, shown in Table A). In 1974
pressure for even more finance led to the Government deciding to
acquire a majority interest and thereby assuming ultimate control. In
1975 it went on to acquire the balance of the ordinary share capital still
in private hands, and eventually by September 1978, according to the
Directors Report attached to the 1977 accounts, the total issued share
capital of the company became vested in the State through the
Department of Commerce for Northern Ireland or its nominees.
Although the company was not subject to the state takeover of British
shipbuilding through the Aircraft & Shipbuilding Act 1977 that Act
ensured that British Shipbuilders (the new state body) would consult
with and co-ordinate its activities with companies, such as Harland &
Woolf, registered in Northern Ireland. De Facto nationalisation of
Harland & Woolf was thereby rendered de jure.
None the less in the years ended 31 December 1976 and 31 December
1977 the company continued to trade at a fairly substantial loss and little
respite from such an unhappy state of affairs was projected by the
chairman in his report of 21 September 1978. In such circumstances
there seems little need to qualify comments and conclusions contained
in the text as it stands.
The crude fact is that the halcyon days of British supremacy in the
shipbuilding world are long gone and, in so far as such industries can
now rarely be viable under private enterprise, the national interest
demands that rather than be abandoned they should be supported by the
public purse.
So, of the three smaller companies, two, namely Lancashire Cotton
and Harland & Woolf, are accounted for. The first was swallowed, or in
view of its super liquidity perhaps one should say drunk, by Courtaulds.
The second, after a catalogue of misfortune, has become state supported
and controlled. This leaves us with William Hancock & Co. Ltd., the
