16 BULLETIN 381, U. S. DEPAETMEXT OF AGEICULTXJRE. 



by subtracting the percentage of gain, based on the last accurate 

 rate of profit (58), from the net sales. Thus, if the net sales were 

 $20,000 for the three months after the last statement, and the net 

 purchases $15,000, the approximate inventory, based on the last 

 gross trading profit (17.3 per cent), would be $14,900 plus $15,000, 

 or $29,900— less 82.7 per cent of $20,000, or $16,540— and the inven- 

 tory would be $13,360. 



AUDITOR'S REPORT. 



The importance of the Auditor's Report is often overlooked. It 

 should be directed to the stockholders and contain (1) a certificate 

 of the condition of the books and office methods, whether or not they 

 agree with the report, and (2) recommendations for improvement in 

 any phase of the business. It should be read by the auditor himself, 

 or by the secretary, immediately after the Manager's Report, and 

 should be adopted and spread on the minutes. If the Manager's 

 Report is printed for distribution among the members, the Auditor's 

 Report should be pubUshed also. It is quite impracticable to give 

 even a general form of an Auditor's Report, since this will vary 

 greatly according to circumstances. Frequently the auditor analyzes 

 the Manager's Report by means of comparative summaries and 

 graphs (Form 8). 



The percentages shown in the merchandise and expense statements 

 may be truly called the barometers of the business. They should be 

 the object of constant study by the management. Not only should 

 the current figures be studied, but they should be compared month 

 by month and year by year. This is accomphshed by the Comparative 

 Statement (Form 8) . A graphic representation of the various sets 

 of figures may be very profitable. Regarding the duties of the 

 auditor and methods, see page 50. 



PRESIDENT'S REPORT. 



It is an excellent practice to require an annual written report from 

 the president as a part of the permanent record of the association. 

 This requirement wiU often stimulate greater activity in the board 

 at a corresponding profit to the association. The report should con- 

 tain (1) a review of the activities of the board and actions at previous 

 meetings; (2) a recapitulation of the financial operations of the year; 

 (3) a tentative budget for next year's operations; (4) recommendations 

 respecting the policy of the association; and (5) any other matter 

 which, in the opinion of the president, should come before the annual 

 meeting. The summary of last year's business and the budget, of 

 course, should be based on the manager's and auditor's reports. 

 Hence, the audited report should be in the hands of the president 

 before his report is prepared. The president or the secretary should 

 read the report to the stockholders, by whom it should be approved 

 and ordered filed or spread on the minutes. The stockholders then 

 proceed to act on the suggestions. 



