Chapter 4

As a general rule private corporations organised under the laws of one State are permitted to do business in other States. It is quite often to the advantage of a company to organise under the laws of one State for the purpose of doing business in another. For instance, there are many companies chartered under the laws of Maine with headquarters in Boston. The Massachusetts laws require that a large proportion of the capital be actually paid in at the time of organising, while the Maine law has no such provision. For similar reasons many large companies doing business in New York or Philadelphia are organised under the laws of New Jersey.

A corporation may make an assignment just as may an individual. If all the members die the property interests pass to the rightful heirs, and under ordinary conditions the corporation still exists.

A FRANCHISE is a right granted by the State or by a municipal corporation to individuals or to a private corporation. The franchise of a railroad company is the right to operate its road. Such franchise has a value entirely distinct from the value of the plant or the ordinary property of the corporation.

An UNLIMITED LIABILITY corporation is one in which the stockholders are liable as partners, each for the full indebtedness.

A LIMITED LIABILITY corporation is one in which the stockholders, in case of the failure of the corporation, are liable for the amount of their subscriptions. The name _limited_ is required by law to appear after the name of the company. If a subscription is entirely paid up there is no further liability--that is to say, the property of a shareholder cannot be attached for any debts of the company. Understand clearly that the name _limited_ printed after the name of a company does not indicate in any way that the capital or credit of the company is limited, only that the liability of the shareholders of the company is limited to the amounts of their shares.

A DOUBLE LIABILITY corporation is one in which, in case of failure, the stockholders are further liable for amounts equal to their subscriptions. All national banks are double liability companies. If A owns $5000 stock in a national bank, and the bank fails, he loses his stock; and if the liabilities of the bank are large he may be obliged to pay a part or the whole of an additional $5000.

XVI. BONDS

When a railroad company, or a city or any other corporation desires to borrow money it is a common practice to issue instruments of credit called BONDS. A bond means something that binds. Bonds bear the same relation to the resources of a corporation that mortgages do to real estate.

Corporation bonds are issued for a period of years. They usually have coupons attached which are cut off and presented at regular intervals for the payment of interest. A bondholder of a corporation runs less risk than a stockholder, first, as to interest: the corporation is obliged to pay interest on its bonds, but may at its own pleasure _pass_ its dividends; secondly, the bondholder is a creditor, while the stockholder of the corporation is the debtor. On the other hand, if a concern is very successful, a shareholder may receive large dividends, while the bondholder receives only the stipulated interest. A _bond_ is evidence of debt, specifying the interest, and stating when the principal shall be paid; a _certificate of stock_ is evidence that the owner is a part-owner in the corporation or company, not a creditor, and he has no right to regain his money except by the sale of his stock, or through the winding up of the company's business.

The name DEBENTURES is given to a form of municipal bond in common use. Nearly all the large sums of money used by States and cities for the building of State or municipal buildings, bridges, canals, water-works, etc., are raised through the issue of bonds (_debentures_), which are sold, usually at a price a little below par, to large financial institutions, banks, and insurance companies. Generally speaking, such bonds are good _securities_, and are marketable anywhere.

At different times the United States government has issued bonds to relieve the treasury. These bonds are absolutely safe and are always marketable. _Registered bonds_ have the name of the buyer _registered_; _unregistered bonds_ are payable to _bearer_. _Municipal bonds_ are issued by cities and other municipalities to raise money for local improvements. If proper precautions are taken by buyers, municipal securities may be considered among the safest and most remunerative investments.

When a new railroad enterprise is undertaken its promoters often expect to make the road not only supply the money for its construction but also give working capital in addition. This is done by the issue of mortgage bonds. Default in the payment of interest throws the road into the hands of a receiver. The securities immediately fall in value and are perhaps bought up by a syndicate of crafty speculators who are permitted to reorganise the road and its management. This is the history of many of our roads. There are exceptional cases, of course, but the investor should be familiar with the facts before buying railroad mortgages.

A BOTTOMRY BOND is a kind of mortgage peculiar to shipping. It is a conveyance of the ship as security for advances made to the owner. If the ship is lost the creditor loses his money and has no claim against the owner personally. It is allowable for a loan made upon such a bond to bear any rate of interest in excess of the legal rate. A vessel arriving in a foreign port may require repairs and supplies before she can proceed farther on her voyage, and in occasions of this kind a bottomry bond is given. The owner or master pledges the keel or _bottom_ of the ship--a part, in fact, for the whole--as security.

We have now upon the market stocks and bonds representing all conceivable kinds of property. Not only are properties of many kinds used to issue bonds upon, but many kinds of bonds are often issued upon the same property. Thus we find among our railroads not only first, second, and third mortgage bonds, but income bonds, dividend bonds, convertible bonds, consolidated bonds, redemption bonds, renewal bonds, sinking-fund bonds, collateral trust bonds, equipment bonds, etc., until they lap and overlap in seemingly endless confusion.

RECEIVER'S CERTIFICATES are issued by receivers of corporations, companies, etc., in financial difficulties, to secure operating capital; they are granted first rights upon the property and are placed above prior lien and first mortgage bonds.

XVII. TRANSPORTATION

The most common effect of cheapened transportation is to increase the distance at which it is possible for producer and consumer to deal with each other. To the producer it offers a wider market and to the consumer a more varied source of supply. On the whole, cheapened transportation is more uniformly beneficial to the consumer; its temporary advantage to the producer very often leads to overproduction. It has the effect also of bringing about nearly uniform prices the world over.

The time was when nearness to market was of the greatest possible advantage. At the present time a farmer can raise his celery in Michigan or his beets in Dakota and market them in New York City about as easily as though he lived on Long Island. It is no longer location which determines the business to be carried on in a particular place, but natural advantages more or less independent of location. But the railroad or the steamboat very often determines where a new business shall be developed. It is this quickening and cheapening of transportation that has given such stimulus in the present day to the growth of large cities. It enables them to draw cheap food from a far larger territory, and it causes business to locate where the widest selling connection is to be had, rather than where the goods or raw materials are most easily procured. It is the quick and comfortable transportation facilities which our large cities possess that have given strength to the great shopping centres. Shoppers for thirty or forty miles around can easily reach these centres, and the result is that trade gathers in centres rather than at local points. A city of a million population in the most productive agricultural section of country could not be fed if the food had to reach the city by teaming. With this growth of trade centres comes the increased gain of large dealers at the expense of the small; with it comes organised speculation and its attendant results, good and evil.

Prior to the completion of the organisation of trunk or through lines, freight was compelled to break bulk and suffer trans-shipment at the end of each line, where a new corporation took up the traffic and carried it beyond. To prevent this breaking of bulk and to expedite the carriage of freight, fast freight lines on separate capitalisation were organised. The purpose of the interstate-commerce law is largely to prevent discrimination and corruption in freight charges, to secure for every person and place just and equal treatment at the hands of the transportation companies. The freight rates are arranged and regulated by the traffic associations, and the various conditions and compromises necessary have made both classifications and rates about as complicated as anything possibly could be.

The name DIFFERENTIAL as applied to freight rates refers to the differences which are made by railroad companies. Certain roads are by agreement allowed to charge a lower rate than others running to the same points. To and from each of the eastern cities there are two classes of roads--the _standard_ lines and the _differential_ lines. The standard lines have the advantage of more direct connections; the differential lines reach the freight destinations by circuitous routes, in some instances by almost double the mileage. With a view to equalising these conditions the general traffic associations allow the differential lines to carry freight at a lower rate per mile than the rate charged by the standard lines.

The transportation business of the United States is so varied and complicated that a proper study of its freight tariffs and classifications would require much more space than can be given the subject in these lessons.

XVIII. TRANSPORTATION PAPERS

The common transportation papers, familiar to all shippers, are the (1) _shipping receipt_, (2) _bill of lading_, (3) _waybill_.

ORIGINAL RECEIPTS, stating marks and quantities of goods, go with each separate lot of merchandise to the freight sheds or vessels, and these are summed up in a formal bill of lading, for which they are exchanged when all the cases or bundles belonging to the particular shipment have been delivered. The duplicate receipt, or the part commonly marked _invoice_, is kept by the receiver of the freight, and the other end, commonly marked _original_, is given to the drayman. In making ordinary shipments it is not usual or necessary to make out a formal bill of lading. Of course, when no bill of lading is made out, the receipt should be preserved by the shipper. The full contract is usually printed on the receipt, but it must be remembered that a receipt is not a negotiable instrument and cannot be used as security for money.

A BILL OF LADING is an acknowledgment by a transportation company of the receipt of goods specified, and contracts for their delivery at a certain place, under conditions stated thereon, upon payment of freight and expenses. Bills of lading are negotiable and maybe transferred by indorsement, but are of no value apart from the goods to which they give title. A bill of lading goes with certain _named_ goods and cannot be transferred to other goods, even though of precisely the same kind and price. Marine bills of lading are usually made in triplicate; one is kept by the shipper, another by the vessel, and the third is sent by mail to the person to receive the goods.

The parties to a bill of lading are three--the shipper, the consignee, and the transportation company. The declaration of having received the goods in good order and condition, and the consequent obligation, subsequently expressed, of delivering them in like good order and condition, is sensibly lessened in its importance by the additional clause now adopted by almost all transportation companies--namely: "Contents and condition of contents of packages unknown." Should the goods or part of them be shipped in a damaged condition, or in a bad condition of packing, a note to that effect should be made by the transportation company on the bill of lading, which ceases then to be a _clean bill of lading_.

Like any other instrument of credit, a bill of lading may be deposited with a creditor as security for money advanced (or it may be transferred to a buyer) by means of indorsement, and the property or goods will be thereby either mortgaged or assigned. Acting upon this principle, the shipper declares in the bill of lading that the goods shall be delivered unto the consignee or his assigns. When a shipper is unable to insert the name of the consignee at the time the bill of lading is made out, a _bill to order_ is drawn up wherein the consignee's name is superseded by the words _shipper's order_, or simply _order_; it being thus understood that the goods shall be delivered to whomsoever presents, at point of destination, the bill of lading duly indorsed by the shipper. By such a simple arrangement as a _bill to order_ the merchant is enabled to sell the goods while they are at sea, or in transit, and a consignment of merchandise may change hands several times before arriving at its destination.

When a case of merchandise to be shipped has been properly entered and weighed it is then ready to be _manifested_ or _waybilled_, as no shipment is allowed to go forward without a waybill. The WAYBILL is simply a memorandum of the consignment, together with full and complete shipping directions, giving also the number of the car into which the case has been loaded, and the point to which the car is "carded." The freight conductor has waybills for all goods which he carries. They are turned over with the merchandise to the agent of the railroad at the point of destination.

Our illustrations show (1) _a shipping receipt_--the half marked "_original_"; (2) _a steamship bill of lading_; (3) _a local waybill_.

EXAMINATION PAPER

NOTE.--_The following questions are set as an indication of the sort of knowledge a student should possess who has carefully read the several papers of this course. The paper covers only about the first half of the course. The student is recommended to write out the answers carefully. Only such answers need be attempted as can be made from a study of the lessons._

1. What in a general sense is meant when we speak of the currency of a country?

2. Enumerate some of the advantages afforded to the community and to commerce in general by banking institutions.

3. A bank cheque is a demand order for money, drawn by one who has funds in the bank. How does a cheque differ from an order on John Smith to pay bearer a certain sum of money?

4. Why is it important that cheques should be very carefully drawn?

5. (_a_) A cheque has no date. Does this make it void? (_b_) How about a cheque dated months ago? (_c_) Is a cheque dated on Sunday good? (_d_) Why are cheques sometimes dated ahead? (_e_) Are you at liberty to print your own form of cheque? (_f_) Is it necessary that your cheque be written on the prescribed blank form? (_g_) How would you write a cheque for 75 cents?

6. How would you word a cheque to give to a person who is unknown at your bank, but who wishes to draw the money over the counter?

7. You are sending a cheque through the mails to John Brown, Philadelphia. How will you prevent the cheque from falling into the hands of the wrong John Brown?

8. You identify A. B. at your bank. The cheque A. B. presented turns out to be a forgery. Are you responsible?

9. A. B. transfers a cheque to you by a blank indorsement. It is then payable to bearer. How can you legally make it payable to your own order?

10. What is meant by power-of-attorney? How should an attorney indorse cheques for any person for whom he is acting?

11. If a note were about to be transferred to you by indorsement and delivery in payment of a debt, would it make any difference to you whether or not it was overdue? Explain in full.

12. Tell how you would receipt for a payment of a note. Why is not an ordinary separate receipt sufficient?

13. Why are notes protested? Why is a formal protest sometimes desired even though the paper bears no indorsements?

14. If an indorser is compelled to pay a note, against whom has he a good claim?

NOTE TO THE FOREGOING EXAMINATION PAPER

It is a mistake to answer questions for a student if he is able of himself to find the answers. A question which sets a student thinking, even though he cannot immediately find a satisfactory answer, affords educational training of considerable value. A few of the answers to the foregoing questions are as follows:

5. (_a_) Not necessarily so. (_b_) Such a cheque would under ordinary conditions be all right. Cheques should be presented as soon after date as convenient. (_c_) Cheques dated on Sunday are very commonly paid. Cheques or notes delivered on Sunday are void. The delivery makes the contract, not the dating. (_d_) That the maker may have a few days in which to deposit sufficient money to meet them. (_e_) You are at liberty to print your own form of cheque or to write it out in full if you wish. (_g_) Write the words "_Seventy-five cents_" plainly along the money line.

8. Yes.

BUSINESS GEOGRAPHY

THE TRADE FEATURES OF THE GREAT COMMERCIAL NATIONS

I. THE TRADE FEATURES OF THE BRITISH ISLES

LONDON AS A FOOD CONSUMER

London is the greatest seat of trade and commerce in the world. Its commercial greatness is evidenced by its greatness of population. Its inhabitants number over 6,000,000. The houses in which this vast population lives, would, if placed end to end, make a continuous street that would stretch across all Europe and Asia. The mere effort of providing food for this vast population necessitates an enormous commerce. Half a million of beeves are required every year to supply its meat market; also 2,000,000 sheep and 8,000,000 fowls. To supply its fish market 400,000,000 pounds of fish are required, and 500,000,000 oysters. Grain, flour, fruit, butter, eggs, cheese, sugar, tea, and coffee, are brought to London daily in such quantities that the prices of these commodities all the world over are based upon what they will fetch in London. Whole nations and provinces and districts get their subsistence from industries that have for their end the supplying of some of this enormous food demand. Denmark, for example, owes its entire prosperity of recent years to its profitable manufacture of butter for the London market. Brittany and Normandy, in France, are almost wholly occupied in supplying that market with poultry and eggs. The islands of Jersey and Guernsey derive their principal wealth, not, as might be supposed, from the sale of milk and butter, but from the supplying of London with potatoes. Canada during the last six or eight years has built up with London an immense trade in cheese, a trade that exceeds in importance any other that Canada has, while even our own home States--Illinois, Iowa, and Wisconsin, for example--have found new sources of wealth in catering to the London dairy trade. "Elgin" and "Ames" creamery butters are products well known to the London consumer.

LONDON THE COMMERCIAL CENTRE OF THE WORLD

What is the reason of London's wonderful prosperity? Already its population is one fifth the entire population of England and Wales, and it is increasing at the rate of about 20 per cent. per decade. Three hundred people are added to the number every day in the year, a rate of 110,000 inhabitants in the course of the year. It is now one half greater than the total population of all Ireland. London's Scotch population is almost as numerous as that of Edinburgh, while its Irish population is quite as numerous as that of Dublin. Every civilised country is represented among its people, and every civilised tongue is spoken among them. A sea of brick and mortar, even now fifteen miles long and ten miles broad, it is growing at the rate of a new house every hour of its existence. Its streets are already 28,000 miles in length, and these are spreading out so rapidly that every year many whole villages and townships are enmeshed by them. Every day 1,000,000 people enter London by railway, and at least 500,000 people have occupations in it in the daytime who reside beyond its limits at night. Fifty thousand people have occupations in it in the night-time who reside beyond its limits during the day. It is the largest importing centre in Great Britain, and the largest in the world, and its exports are exceeded only by Liverpool, and not always by Liverpool. It is also the centre of the world's financial business. For example, traders in the East Indies who ship cargoes of spices and other Eastern produce to America, draw in settlement on London rather than on New York, while traders in America who ship cargoes of cotton to Marseilles or Riga, draw in settlement on London rather than on Paris or St. Petersburg. What is it that thus makes London the chief seat of population in the world, the commercial metropolis of the world, the great financial clearing-house of the world?

LONDON THE CENTRE OF THE LAND SURFACE OF THE GLOBE