2. Suggest what you would consider a fair division of any gains by Mr. Green and Mr. Grey, mentioned in Art. 248, if they formed a partnership. State this by an equation, using literal numbers.

3. Suppose that they entered into a partnership investing $4850 in a stock of goods. How much money had they left with which to carry on their business?

At the end of a year of business their stock of goods invoices at $9835 and they have bills receivable to the amount of $ 2783. The firm owes Mr. Green $ 725 on uncollected salary and a note of $3000, together with interest at 6%; it owes Mr. Grey $ 465 uncollected salary and a note of $5000, together with interest at 6%; bills to an amount of $ 1085.

4. Not counting profits, how much does the firm owe Mr. Green? Mr. Grey?

5. Make out a statement showing the resources and the liabilities of the firm. The net present worth of the firm is really the yearly profit. What is this?

6. Divide the yearly profit according to the manner which you suggested for Ex. 2. What is then the total present worth of each of the partners?

Mr. Jelks owns 80 A. which he leases to Mr. Granger to plant in wheat on the following conditions: the owner pays for the seed and receives of the grain.

7. If 5 pecks are planted per acre, what will be the cost of the seed at $2.65 per bushel ?

8. If 1127 bu. were harvested and sold at $1.47 per bushel, what were the returns of each man? What were the net returns of the owner?

Answer the questions in Exs. 7 and 8 with literal

numbers.

10. Suggest and solve some other partnership problems.

XX

CORPORATIONS

250. Organization. Suppose that a few men desire to enter into some business enterprise, as building a railroad, which requires much more capital than they possess. The customary way is for them to organize a corporation, also called a stock company. These men are called the organizers or promoters of the corporation. First, they draw up a statement of the name of the corporation, its officers and their duties, the purpose of its business, the amount of capital to be invested, and the number of equal parts, called shares of stock, into which the capital is to be divided. As soon as these men have found a sufficient number of persons willing to invest money in the enterprise, usually fixed by law, they present the above-mentioned statement to the secretary of state in the state in which they are to carry on their business. He issues to them a charter, also called papers of incorporation, stating the conditions under which the corporation may do business.

The value of a share of stock as stated in the charter, called its par value, may be of any amount. In smaller corporations, as in a local creamery, it may be from $5 to $50; in the larger corporations, as in railroads, it is usually $100. At stockholders' meetings each stockholder has a voting power proportional to the number of shares owned. Thus, one owning 51 % of the total stock can control the corporation. How? The capital equals the par value per share times the number of shares. Thus,

C = NX Vp.

251. Corporations versus Partnerships.-Corporations possess many advantages over partnerships, of which the principal ones are:

1. The number of shareholders may be increased to any number so as to secure as large funds as needed.

2. Entering or leaving a partnership is often difficult. Buying or selling shares of stock is a simple matter.

3. In a partnership each partner is individually liable for all debts of the firm. In a corporation each stockholder is usually liable for debts to a sum equal to the par value of the stocks owned.

EXERCISES

1. State three illustrations of corporations, of which at least one is local; that is, in your community.

2. Solve the equation on page 214 for N. A company is incorporated for $10,000, with shares at $50 each. How many shares does it have?

3. How many shares must one person own to hold a controlling interest in the corporation of Ex. 2?

In order to create an interest in a Community Fair, it was incorporated for $20,000, with shares of par value $10. How many shares were there? If the charter further provided that no one could own more than $ 200, par value, of stocks, what is the smallest number of stockholders the fair could have? What reason can you give for this last requirement?

5. Draw up a statement for the incorporation of a company to conduct an electric railway in your city.

6. Draw up a statement for the incorporation of the athletic association of your school.

252. Profitable and Non-Profitable Stocks.-A successful corporation has profits, called dividends, to distribute among its stockholders. Dividends are stated as a certain per cent of the par value of the stock. They may be paid yearly, half-yearly, or quarterly. If a corporation loses money, it assesses its stockholders a per cent of the par value of the stock sufficient to pay the deficit.

EXERCISES

1. What is the yearly income from 5 shares, par value $1000 each, which declares-pays a semiannual dividend of 3 %? of 11 %?

2. State by an equation the per cent of dividends paid by a corporation in terms of its capitalization and profits. What per cent of dividends does a company incorporated for $50,000 pay in distributing $1250 of profits?

3. A company incorporated for $ 125,000 declares 11% quarterly dividends. What are the yearly profits it distributes among its stockholders?

4. If a corporation declared 21% dividends quarterly, what interest would that be on money invested in it? What would be the income from eight $ 50 shares?

5. Which brings the better income, a 5 % mortgage or shares of stock declaring 11 % dividends quarterly?

6. Mr. Jowel bought some shares of stock that paid him 9% dividends the first year he owned them. Through changes in conditions the company did not prosper the second year and he had to pay an assessment of 4 % on his shares of stock. What per cent of interest did he get for the 2 yr.? How much per year? Compare this with a 5% mortgage. Which would you rather own?