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

74 NATURE OF CAPITAL AND INCOME [CHzar. V the value of the assets. Sometimes this is done systemat- ically, asin the case of stock-jobbing concerns. Unscrupu- lous promoters often invest the sums entrusted to them by confiding stockholders, in unwise or fraudulent ways. For instance, we may imagine an Oil Well Company in California, of the type called ‘stock-producing wells,” which borrows $50,000 and collects $50,000 more from the sale of stock (at par), and with this $100,000 purchases land of friends at a fancy price, collusively providing that the proceeds be returned in large part to the promoter. In such a case the books of the bubble concern will show the following figures: — Assets Liabilities Land. oe 8100000 Dalste co. + «350,000 Capitals... . « «. «50,000 $100,000 $100,000 But if the land is worth, say, only $60,000, these accounts should read : — Assets Liabilities and: . .. . - - .. 50000 Debts .'. . . . . $50,000 Capital .-. . + . . 10,000 $60,000 $60,000 In other words, the investor has only $10,000 worth of property, instead of the $50,000 which he put in, or 20 cents for every dollar he invested. The rest has been diverted into the pockets of the promoter and those in collusion with him. A favorite method of concealing the real condition of a company is to enter among the assets the bad debts due it, at their nominal value. Sometimes bad debts are bought up for that special purpose, the fraudulent company invest- ing in the notes of some bankrupt concern, which can be obtained for very little, but may be entered on the books at face value. It is clear that any exaggeration on the assets side of the ledger produces an equal exaggeration of

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