70 NATURE OF CAPITAL AND INCOME [CHAR. V

of to the present capital. Recapitalization may be effected,
 however, by recalling the stock certificates or issuing
 new ones. In these ways the nominal or book value
may be either decreased or increased. It is sometimes
scaled down because of shrinking assets, and often increased
because of new subscriptions or expanding assets. If, for
instance, the original capital was $100,000, and the present
capital (that is, including surplus and undivided profits)
is $200,000, it would be possible, in order that the total
certificates outstanding might become $200,000, and the
surplus and undivided profits be enrolled as capital, to
issue free to each stockholder stock certificates of a face
value equal to those already held. In practice, however,
 such a proceeding is very rare. Ordinarily the stock
certificates remain as originally, and merely increase in
value. Thus, if the present capital is as in the above
example, $200,000, whereas the original capital and the
outstanding certificates amount to only $100,000, the
market value of the shares will be double the face value;
for the stockholders own a total of $200,000, represented
by certificates of the face value of $100,000.

§3

If, however, we attempt to verify such a relation by
reference to the company’s books, we shall find some dis
crepancies in the results. For instance, the Second National
Bank of New York had, at a recent statement, a total
capital, surplus, and undivided profits of $1,295,952.59, of
which the original capital was only $300,000. We should
expect, therefore, that the stock certificates, amounting
to $300,000, would be worth $1,295952.59, or, in other
words, that each $100 of stock certificates would be worth
$432. The actual selling price, however, is found to be
$700. Again, the Fourth National Bank of New York
City had a total capital, surplus, and undivided profits of
$5,700,000, of which $3,000,000 was capital. From this