15. Extending the capital of an existing corpora tion.—The most interesting problems of corporation finance arise when a corporation is already in existence and desires to extend its operations. Numerous sources of capital are open, and there are various ways of obtaining it. As a going concern, newly incor porated, the company can probably retain the capital which was employed in the business when it was a partnership or individual proprietorship, and in addi tion draw new capital by virtue of its corporate form.
A clear idea of how capital is raised by an existing corporation, and of who furnishes it, may be had from the diagram on page 37.
In the left-hand column are noted the various means of securing capital ; in the right-hand column are given the principal persons or classes of persons who furnish it. The connecting lines show the usual sources from which capital can be obtained by each method. This chart takes 'no account of the brokers, bondhouses, underwriters, stock exchanges, or other elements in the purely distributive machinery utilized to get the various securities into the hands of their ultimate owners.
Of the five methods here named, the first four, it will be plainly recognized, are not peculiar to the cor poration, and might be equally applicable to a part nership. The fifth group, the issue of securities, is a very broad one. To avoid confusing the chart the sale of bonds and long-term notes, of preferred stock, and of common stock are grouped together, altho they constitute three separate and distinct methods. They
will be considered in later chapters.
If attention is directed to the right-hand column, it will be noted again that the sources of capital sup ply numbered from 1 to 6 are, in the main, open to partnerships as well as to corporations. The single qualification of this general statement is found in the fact that concerns with which the corporation has deal ings may, thru the purchase of securities, contribute to the capital of the company, but are rarely willing or able to join in a partnership enterprise.
16. Fixed and working capital.—It will be noted, further, that in the main the corporation can acquire working or fluid capital by the same means and from the same sources as the partnership. It differs from the partnership in its acquisition of fixed or perma nent capital. While the partnership can draw for such purposes only on the resources of the partners, the corporation can enlist the capital of any one who will purchase its securities.
The foregoing summary of how capital is obtained by the corporation is merely intended as a sketch.
The detailed consideration of the different methods of raising corporate capital and the circumstances under which each applies will form the subject-matter of succeeding chapters.