The nature of capital and income

Bibliographic data

Monograph

Identifikator:: 102659555X

URN:: urn:nbn:de:zbw-retromon-82920

Document type:: Monograph

Author:: Fisher, Irving http://d-nb.info/gnd/118533541

Title:: The nature of capital and income

Place of publication:: New York

Publisher:: The Macmillan Company

Year of publication:: 1923

Scope:: XXI, 427 Seiten

Digitisation:: 2019

Collection:: Economics Books

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Document type:: Monograph

Structure type:: Chapter

Title:: Part I. Capital

Collection:: Economics Books

Sec. 12] CAPITAL ACCOUNTS 85 ever, that if we employ the term “wealth” in its larger sense, a person who is really good for his debt is him- self assets to that extent. His present value must in the estimation’ of his creditors be at least equal to the dis- counted value of his debt-paying power; otherwise he could not borrow. It follows that his liability, being only part of the discounted value of his debt-paying power, cannot exceed his assets. The second corollary, from the principle that all securities imply risk, is that the distinction between stockholders and bondholders is chiefly one of degree, and may be bridged over by intermediate forms. Preferred stock and income bonds amount to very nearly the same thing. The preferred stockholder is elevated above the common stockholder, and resembles a bondholder in that he is as- signed a certain fixed amount of the earnings before any accrue to the commonstockholder. The income bondbolder, on the other hand, is depressed below the other bondholders, and resembles a stockholder in that he will not be paid until the ordinary bondholders have been satisfied. The chief remaining differences between these two forms of security are that the stock confers voting power, while the bond does not; and that the bond has a due date for final ex- tinguishment, while the stock continues until the company is “wound up.” The distinction between the different classes of creditors of a concern is still further swept away in some cases where there is no capital stock, as in that of a mutual insurance company. Here the policy holders, instead of being creditors for fixed sums due them from the company, as are the bondholders of a joint stock concern, themselves assume the risk of the business and also take whatever chance there may be of profit. They are, as it were, both stockholders and creditors. In the accounts of a mutual company there will be almost no outside creditors. In such companies, therefore, bankruptcy would seem to

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