companies, and latterly in many other industrial enterprises, it throws the capitalization of the business concerns
,tA
H 116 THE THEOEY OF BUSINESS ENTERPRISE H
^m affected by it into a peculiar, characteristically ^M
^1 modem, position in relation to credit. When car- ^M
H ried out thoroughly it places virtually the entire ^M
H capital, comprising the whole of the material ^M
equipment, on a credit basL'*. Stock being issued by the use of such funds as will pay for printing the instruments, a road will be buUt or an industrial plant established by the use of funds drawn from the sale of bonds ; preferred stock or similar debentures will then be issued, commonly of various denominations, to the full amount that the property will bear, and not infrequently somewhat in excess of what the property will bear. When the latter case occurs, the market quotations of the securities will, of course, roughly adjust the current effective capitalization to the run of the facts, whatever the nominal capitalization may be. The common stock in such a case represents " goodwill," and in the later development it usually represents nothing but " good-will." ' The material equipment is covered by credit instruments — debentures. Not Infrequently the debentures cover appreciably more than the value of the material equipment, together with such property as useful patent rights or trade secrets ; in such a case the good-will is also, to some extent, covered by debentures, and so serves as virtual collateral for a credit extension which is incorporated in the buai-