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