buyer, but in the business in which the buyer is engaged, and in his ability, experience and judgment. There are various sources through which this information can be obtained, which will be outlined in a separate chapter.

Ability of the buyer to pay is dependent upon many different factors, but most usually upon his solvency and resourcefulness. A resourceful debtor frequently extracts himself from facing bankruptcy by obtaining an extension from his creditors, which is usually granted if they have faith in the continued profitable operation of the business and eventual ability of the debtor to pay his obligations. To be what is commonly known as an "able business man" is, however, not sufficient. The ability of the buyer must be of a character such only as is developed by long experience in the particular line of business undertaken. The ability of a debtor to pay, also, frequently depends upon whether or not he has himself extended credit judicially and whether or not he can in turn collect from his debtors. His ability to pay may depend upon his having sufficient knowledge and judgment to be able to produce an article for which there is a profitable market, or, in the case of jobbers, to resell a commodity at a profit. The ability of the average wage earner or salaried employee to meet his obligations depends somewhat on the nature of his employment and to some extent on whether or not he is living beyond his means.

Another necessary factor of credit is experience. The

one to whom credit is extended must have had experience in the line of business in which they are engaged, and this experience in most cases must be practical and not theoretical. A school or business college cannot turn out young men as full-fledged business men who can make an immediate business success without any practical experience. A young man of immature experience may make a success of business and may be entitled to credit, if he has all the other necessary factors to establish a credit, but the hazard is greater in dealing with an inexperienced credit risk than it is in dealing with an experienced one.

Experience is also required on the part of the credit grantor, in that he must be able to analyze human nature and have had experience in dealing with business men and business institutions; he must have had some experience in analyzing financial statements; so that it is clear experience is a very necessary element of credit.

The general reputation of the parties to a transaction is also an important element of credit. If a seeker of credit has a poor reputation for paying his bills, or has the reputation of dissipating or neglecting his business, or has the reputation of a generally low moral standard, the credit man should carefully investigate his standing in this respect. Sometimes such a reputation is unjust, and has been circulated by enemies. In that sense reputation is different from character, for a man may have a poor reputation temporarily but fundamentally

have a good character. On the other hand, clever seekers of credit have practically no character but often temporarily have a good reputation. A man's reputation, whether good or bad, always reflects upon his credit accordingly and his reputation is a large element of his credit.

Another element of credit is judgment. The use of the term "judgment" covers a broad field, but whether good, sound business judgment exists in a seeker of credit or not can usually be determined by proper inquiry. For instance, a manufacturer who is devoting a large part of his capital and labor toward experimenting in theoretical or visionary ways naturally affects his credit; a jobber who frequently overstocks displays poor judgment; a jobber who invests a large portion of his capital in a building frequently displays poor judgment. If the assets of a seeker of credit are tied up in slow-moving or non-productive assets, good business judgment is lacking. The business man of good judgment will see that his turn-over is frequent; that terms of sale are reasonably short; that he is not overstocked, and that his merchandise does not become obsolete. An individual who expects credit will display good judgment by not living beyond his means, so that his obligations can be paid when they are due. If he has any tendency to speculate, he should only speculate with certain funds from a savings account. Judgment must also be displayed on the part of the

granter of credit. After careful inquiry of the buyer's standing and after weighing all the facts, the final approval or rejection of a credit order requires good judgment. Many doubtful looking orders can be made safe by applying the proper remedy as will be shown later herein.

CHAPTER II

FUNCTIONS OF THE CREDIT MAN

It is not sufficient for the credit man to merely O K the order of a concern rated AA A1 and turn down orders of buyers with merely medium or poor rating; an office boy or clerk could exercise that function. The credit man must not only get all the available reliable information that he can concerning a customer, but should also make an effort to turn an order from a poorly rated concern into a good order by obtaining security, or by giving advice to the customer or in any other way that he can. His position is one of trust and responsibility, and in many respects his responsibility is greater than that of a banker. The banker is very frequently in a position to obtain collateral or real estate security; he has the advantage of seeing a borrower's checking account, and is also in position to require a written, definite, concrete, unconditional obligation of the borrower before parting with value.

On the other hand, a credit man who is safeguarding the property and investments of his employer usually is furnished with nothing but the order of a buyer, which may be only verbal, but even if written is usually unsecured, and there is no definite, concrete obliga