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177
HIGH RATE OF INTEREST.
The high rate of interest now charged is a matter of
special importance, and it is interesting to compare the rate of
4 per cent. for the last loan with only 2 per cent. for the
first large loan. This makes a very great difference to the
Department, as it must be remembered that the nett profit, or
surplus simply consists of the difference between the interest
earned and the interest we have to pay to the Mortgagees.
At the present high rate, on the loan of £I8,985 taken
up on the I5th January, I907, we pay £5,895 as interest during
the I5 years, but if the loan were repayable in 42 years, £I6,380
would be paid as interest. There is, therefore, a clear saving
of £I0,485 to be profitably invested in the Department instead
of going into the hands of the London County Council. The
more rapidly the loans are redeemed the less interest paid to
outside sources, and the greater the residual value of the Plant
and system.
CAPITAL REPAID DURING YEAR.
Dealing specifically with the present year; after
paying all outgoings of manufacture and management there
remains a gross profit of £I5,509 Is. 3d. earned by our outstanding
Debentures, equivalent to 6.54 per cent. on the
outstanding Capital. The interest which must be paid to the
owners of this Capital (or Debentures) has absorbed £7,56I
2s. 2d., being at the average rate of 3.23 per cent. on the nett.
liability of £229,497 plus £7,°36 =£236,535.
It would be as well to explain this figure of £236,535
which is arrived at by taking the nett Capital liability of
£229,497 and adding to this the overdrawn balance on Capital
Account for which a loan application is now being made.
This does not of course agree with the aggregate Capital
expended (£275,444) but it must be remembered that the
machinery, &c., purchased with this Capital has depreciated,
and now stands in our bcoks at a much lower figure.
When comparing the Returns of Capital invested in
a Municipal trading concern with the dividends paid by
Companies on their paid up Capital, it is the depreciated
Capital of the Municipalities which I think should be taken and
not the aggregate amount expended. The difference between
the Accountant's Return of 5.6 per cent. and my figure of
6.54 per cent, is made up as follows :—
Depreciated Capital £236,535. Aggregate Capital £275,444.
Interest £7,65I=3.23 per cent. £7,65I=2.78 per cent.
Repayment£7,829=3.31 percent. £7,829=2.84 per cent.
Total £I5,480=6.54 per cent. £I5,480=5.62 per cent.