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

Usage license:: Get license information via the feedback formular.

Chapter

Document type:: Monograph

Structure type:: Chapter

Title:: Part I. Capital

Collection:: Economics Books

I —_—— TT Sc. 6] CAPITAL ACCOUNTS 75 the capital, surplus, and undivided profits, on the opposite side. A great responsibility, therefore, rests on those who construct commercial accounts. § 6 Thus far we have considered the fluctuations of the items of a capital account independently of any payments between the company and the stockholders. When pay- ments are made to the stockholders in the shape of divi- dends, the effect is to reduce both sides of the account, de- pleting the cash on the assets side, and the undivided profits on the liabilities side, each by the amount of the dividend. If a dividend is declared larger than the undivided profits, the effect will be to reduce the surplus, or even the capital. For most business concerns it is regarded as bad policy, or even fraudulent, to pay dividends out of capital. How- ever, there is no inherent reason why such dividends should not be paid, and in some sorts of business it is not only proper but necessary. In these cases when divi- dends are paid out of capital there should be a corre- sponding reduction in the amount of outstanding capital stock, in order that those dealing with the concern may not be deceived. For instance, land companies in Colorado and California, such as the Redondo Land Company, are formed for the express purpose of investing in land and sell- ing it again. As fast as it is sold, the proceeds are divided among the stockholders, and stock certificates cancelled, until the whole capital of the company is cleared away. Ordinarily, however, reduction in capital takes other forms than dividend payments. The payment of dividends out of capital is, generally speaking, unlawful, otherwise the creditors of a company might suddenly find themselves without any adequate security for their loans. Payments are, of course, also made from the stock- holders to the company. We will suppose that a company is formed with a capital stock of $100,000, but that when its

Access restriction

Copyright

fullscreen: The nature of capital and income

Monograph

Chapter

Table of contents

Download

Monograph

Chapter

This page

Image fragment

Citation links

Citation recommendation