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The New Zealand Railways Magazine, Volume 2, Issue 8 (December 1, 1927)

The Railway Capitalisation

The Railway Capitalisation.

In conclusion, a few words as to Capitalisation. It sometimes happens in business that obsolescence of premises or plant, or changing methods, or a new process or vogue, or some other cause, forces on the shareholders the realisation that their company cannot be expected to continue earning profits on the amount invested. In such case the company reconstructs; the losses are faced and written off the capital, or in other words the capital is written down. Are the Railways in that position? Does the capital account contain thousands of entries of which the assets are no longer in existence? If so, it is not reasonable to look for “dividends” still to be earned on them. Write down the capital account to a proper figure, and set out to make a commercial profit on the reduced amount.