the patents, that they can be sold at a good profit, and the management of the business is able and honest, the common stock may sometimes prove to be more valuable than the preferred stock, when this is limited to a certain rate of dividends and the profits of the business allow the payment of dividends at a higher rate on the common stock. While this illustration shows the case of a corporation organized to develop the earning power of patents covering an invention, the same principle may be applied to the greater development of the earning power of a business in any line, railroading, manufacturing, mining or any other, which in a smaller way has proved to be profitable, but which needs more capital to increase its earning power. In such organization or reorganization it is now pretty well understood by the investing public that when both preferred and common stock are issued, the preferred usually represents actual money or capital put into the business, while the common represents only the hope of earning power which may or may not be realized, depending largely upon the ability, judgment and integrity of the managers, essentially necessary to the success of business enterprises, whatever their nature. CHAPTER XI. BANK REPORTS-EXAMINATIONS. A MATTER of considerable interest to the shareholders of a bank, as well as to its depositors or other creditors, is its "condition," and so far as these interested parties and the general public are concerned, information as to this is to be obtained only through the "statements" or "reports of condition" which the law requires banking institutions to publish in the newspapers from time to time. In the case of National banks, the law compels them to make not less than five reports of condition every year to the Comptroller of the Currency, at such dates as he may decide to call for them, which reports must also be published in a local newspaper. Not knowing when these reports will be required, the banks are not able to make special preparation for them, and thus they usually represent what may be called the "normal" condition of the bank's affairs. They must also be made up in such form as the Comptroller prescribes, no matter in what form the bank's accounts are kept, or its books, and finally, the correctness of the report must be verified under oath before a notary public by the cashier or president of the bank, and attested by the signatures of three of the directors. To insure the correctness of these reports, the law prescribes a heavy penalty of imprisonment for not less than five years nor more than ten, on any officer swearing to a re port of condition which at the time he knew to be false in any statement. Notwithstanding this penalty, occasionally an officer swears to a false report, hoping thereby to conceal some act of theft or other dishonesty on his part. Such dishonest reports, however, are rare and exceptional, and as a rule bank reports can be relied on as representing the condition of the bank as actually shown by its books. Again, while such a report shows the "book value" of a bank's resources or assets, this will not be the actual or market value in a case where losses have been sustained on its loans and discounts or other investments and have not yet been written or charged off the books. The following is a specimen of the "report of condition" of a National bank, as it is published in the newspaper, at or near the place where the bank is located, viz.: This information enables the Comptroller of the Currency to form an opinion as to the condition of the bank and the way in which its affairs are managed, and also, within certain limits, whether or not it is violating the law. While National banks are required to make five reports of condition each year, and some States require the same number of reports from commercial banks under their authority, the number and form of reports required from such banks and from savings banks and from loan and trust companies vary according to the laws and regulations made by the various States. No. of Bank. CAPITAL STOCK AT CLOSE OF THIS EARNING PERIOD. S.. No. of Dividend......... REPORT OF EARNINGS AND DIVIDENDS OF following form, furnished by the Comptroller: annually or oftener from National banks, made up in the Reports of earnings and dividends are also required semi 1, , Cashier of the above-named bank, do solemnly swear that the above statement is true, to the best of my knowledge |