70 NATURE OF CAPITAL AND INCOME [CHAR. V 
of to the present capital. Recapitalization may be ef- 
fected, however, by recalling the stock certificates or issu- 
ing 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, how- 
ever, 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