Knowledge that Transforms

Reviews the book "Accountants' Reports," by William H. Bell.

Abstract There is an increasing tendency for the U.S. statutory law to rest dividend declarations upon the existence of an excess of assets after excluding appraisal increases. This is accompanied by a tendency to drop the traditional common law test of the existence of undivided profits. The growing preference therefore seems to be for an indirect control over dividends by rules which say in effect, maintain capital and all excess assets may be disbursed as dividends. This type of rule creates the problem of defining the capital which is to be maintained. On the other hand, a direct approach to dividend control would favor a rule which would say in effect, no dividend disbursement may be made beyond the amount of the accumulated, undivided profits. The problem then would become one of defining profits for dividend purposes. Presumably either method could be made to work satisfactorily provided only that respective definitions were comprehensive and their interpretations clear enough to furnish trustworthy controls in all instances. But recent changes in corporation statutes have not shown much tendency to produce an adequate definition of the capital fund to be maintained before dividends may be declared.

Abstract Economists and accountants have looked at the prospect of inflation from different basic points of view. Some have thought principally of the effects that inflation will have upon business profits, hence upon employment and power to pay debts. Others have thought principally of effects upon real wages and the standard of living. And others have concentrated their attentions on effects upon accumulated capital, such as savings, or upon stock-market prices or public finance. But none seem to have given any thought at all to the effect that inflation is sure to have upon the ability of the economic key men to choose wise courses of economic action for people. In practical business life these key men are managers of business enterprises, whether large or small. These men may be filling roles of entrepreneurs, or they may be merely paid servants of real entrepreneurs. But in any case the direction of economic activity and the amount and intensity of it, are determined by these men. If they decide to produce more or less of certain products and services, then land, labor and capital will be employed for those purposes.