CONTENTS 
SECTION 7—CAPITAL STRUCTURE AND POLICIES 
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Three Principal Phases of Corporate 
Finance 513 
Relation of Finance and Accounting. . 513 
Fundamental Rules of Finance 513 
Corporate Promotion 
Promoters 
Stages in Promotion 
Investigation 
Probable Net Earnings - 
Preliminary Analysis of Railroad Pro 
motion - 
Promotion of Combinations 
Causes of Failure in Promotions 
Essentials of Promotion Requirements 
Promoter’s Profits 
Promotion Failures 
Syndicates 
Steps in Syndicate Organization...... 521 
Organization of the Purchase Syndi 
cate. . 
Compensation of Syndicates - - 022 
Detailed Description of Syndicate Op 
eration 522 
Financial Plan 
Fixing Types of Securities. . 
Fundamentals of the Financial Plan. . 
Adapting Securities to the Investment 
Market 
Listed and Unlisted Securities 
Securities Issued At or Under Par. . . . 
Paying Interest in Several Places..... 
Payment by Company of State and 
Federal Taxes 
Financial PLin Adopted to Retain 
Control. . * - 
Proportion of Assets to Capital Issues . 
Capitalization of Assets 
Fundamentals Affecting Capital Issues 
Factors to be Considered in Formu 
lating the Corporate Financial Plan 
Earnings and Cost of Assets in Finan 
cial Plan 
Bond Issues and Regularity of Earn- 
Basis of Determining Probable Earn 
ings ^ ....... . 
Summary of Principles in Developing 
Financial Plans 
New Financing of an Old Concern. . . . 
Readjustment of the Capital Structure 
of a Solvent Concern 
Illustration of Financial Plan for a 
Small Industrial Combination 
Illustration of a Financial Plan of a 
Railroad 
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Marketing Securities 
Sale of Securities 534 
Wholesale Investment Bankers. 534 
Advantage of Listing Securities on 
Stock Exchange 536 
PAGE 
Selling Securities Direct by the Com- 
pany - - 536 
Direct Selling Proper for Small Issues . 536 
Direct Sales of Securities by Public 
Utility Companies 537 
Corporate Capital 
Capital Stock and Capital Distin 
guished 538 
Capitalization oss 
Capital and Net Worth 538 
Capitalization 
Cost and Value Often Confused 
Capital Investment as Basis. . - - - 
Capitalization Based on Earning 
Power 
The Magic of Par Value 
Rate of Capitalization 
Definition of Earning Power 
Computing Earning Power 
Average Earnings 
Overcapitalization 
U ndercapitali zation 
Capitalization of Good-Will 
and Other Intangibles 
Where Valuations Required 543 
Valuation of Good-Will on Excess 
Earnings - - - — • • 544 
Permanency and Amount of Good-Will 547 
Actual Good-Will Valuations 547 
Good-Will in Purchase and Merger . . . 548 
Relation of Common Stock to Good- 
Will 549 
Good-Will in Partnership Incorporated 550 
Good-Will Based on Trade-Names. ... 550 
Going Concern Value 550 
Capitalization of Trade-Marks 551 
Capitalization of Secret Processes.... 551 
Capitalization of Brand Names 552 
Classification of Stock 
Preferred Stock 552 
Voting Privileges - 555 
Provisions Safeguarding Preferred 
Stocks 555 
Sinking Fund Requirements. 556 
Retention of Working Capital in the 
Business 556 
Limitations of Dividends on Common 
Stock ; 556 
Enforcing Restrictive Provisions 006 
Common Stock—Definition 558 
Full-Paid and Non-Assessable Stock. . 5o9 
Full-Paid Stock Sold at a Discount. . . 559 
Assessable Stock 559 
Special Types of Stock 560 
Treasury Stock 560 
Unissued Stock 560 
Authorized Stock 561 
Values of Stock .... 561 
Advantages of No-Par Stock o62 
The Valuation of Common Stocks. . .. 563