Areorganizationofindustrialconcernsonalargescale，suchasarenotuncommonatthepresenttime，involvesacampaignofbusinessstrategy，engaging，itissaid，abilitiesandresponsibilitiesofaveryhighorder。Suchacampaignofbusinessstrategy，ascarriedoutbythemodemcaptainsofindustry，runs，inthemain，oncreditrelations，inthewayoffinancialbacking，options，purchases，leases，andtheissuanceandtransferofstockanddebentures。Inordertocarrythroughtheselarge“deals，“inthefirstplace，averysubstantialbasisofcreditisrequired，eitherinthehandsofthepromoterorganizerhimselforinthehandsofacredithousewhich“finances“theorganizationforhim。
Thestrategicuseofcredithereinvolvedis，ineffect，verydifferentfromtheold-timeuseofloancreditininvestments。Intransactionsofthisclassthetimeelement，thecreditperiod，isaninconspicuousfactoratthemost；itplaysaverysubordinateanduncertainpart。Thevolumeofcreditatthedisposalofagivenstrategistisaltogetherthedecisivepoint，ascontrastedwiththelapseoftimeoverwhichtheincidentcreditextensionmayrun。Theusefulnessofthecreditextensionisnotmeasuredintermsoftime，norarethegainswhichaccruetothecreditorinthecaseproportionedtothelengthoftimeinvolved。
Thisfollowsfromthepeculiarnatureoftheworkwhichthesegreatcaptainsofindustryhaveinhand，andmoreremotely，therefore，fromthepeculiarcharacteroftheearningswhichinducethemtoundertakethework。Theirwork，thoughitisofthegravestconsequencetoindustry，isnotindustrialbusiness，inthatitisnotoccupiedwithanythingliketheconductofacontinuousindustrialprocess。Norisitofthesameclassascommercialbusiness，orevenbankingbusiness，inthatthereisnoinvestmentinacontinuedsequenceoftransactions。Itdiffersalsofromstockandproducespeculation，asthatiscurrentlyconceived，22*inthatitdoesnotdependonthelapseoftimetobringachangeofcircumstances；althoughithasmanypointsofsimilaritywithstockspeculation。Initsdetailsthisworkresemblescommercialbusiness，inthatithastodowithbargaining；butsodoesallbusiness，andthispeculiarworkofthetrustpromoterdiffersfrommercantilebusinessintheabsenceofcontinuity。Perhapsitsnearestbusinessanalogueistheworkoftherealestateagent。
Thevolumeofcreditinvolvediscommonlyverygreat；whereasthecreditperiod，thelapseoftime，isanegligiblefactor。
Indeed，ifanappreciablecreditperiodintervenes，thatisafortuitouscircumstance。Thetimeelementinthesecreditoperationsisinabeyance，oratthebest，itisanindeterminatemagnitude。Hencetheformulashownabovep。95，n。3ispracticallynotapplicabletobusinessofthisclass。Sofarasbearsuponthecreditoperationsinvolvedinthesetransactionsofthelargefinance，thequestionaboutwhichinterestturnsisalmostexclusivelythevolumeoftheturnover；itsvelocityisanegligiblequantity。Suchstrategicuseofcreditisnotconfinedtothebusinessofmakingormarringindustrialcoalitions。Itishabituallytobemetwithinconnectionwithstockandproduce
speculation，andramificationsofthelikeuseofcreditrunthroughthedealingsofthebusinesscommunityatlargeinmanydirections；butitrarelyattainsthemagnitudeintheserviceofstockspeculationwhichitreachesinthecampaignincidenttoatrust-makingdeal。Theformofcreditextensionemployedinthesetransactionswithindeterminatetimealsovaries。Theolderandmorefamiliarformisthatofthecallloan，togetherwiththestockexchangetransactionsforwhichcallloansarelargelyused。Herethetimeelementispresent，especiallyinform；butthecreditperiodissomewhatindeterminate，asisalsothegainthataccruestothecreditorfromthetransaction；althoughthecreditor’sgainherecontinuestobecountedatavariableratepercent。pertime-unit。Thestrategicuseofcreditintheaffairsofthelargebusinessfinancehasmuchincommonwiththecallloan。Indeed，thecallloaninsetformisoftenresortedtoasavaluableauxiliaryrecourse，althoughthelargerarrangementsforfinancingsuchacampaignofbusinessstrategyarenotusuallyputintheformofacallloan。Thearrangementbetweenthepromoterandthefinancialagentiscommonlybasedonalessspecificstipulationastocollateral，andthepaymentforcreditobtainedtakesevenless，ifany，accountofthelengthofthecreditperiod。Infinancingacampaignofcoalitionthecredithousethatactsasfinancialagentassumes，ineffect，anevenlessdeterminatecreditresponsibility。Here，too，thegainsaccruingtothecreditorarenolonger，evennominally，countedpercent。pertime-unit，butratherintheformofabonusbasedmainlyonthevolumeoftheturnover，withsomevariabledegreeofregardtoothercircumstances。
Answeringtotheessentiallytimelesscharacterofthegainsaccruingtothefinancialagent，theearningsofthepromoterengagedintransactionsofthisclassarealsonotofthenatureofprofitspercent。pertime-unit，butratherabonuswhichcommonlyfallsimmediatelyintotheshapeofashareinthecapitalizationofthenewlyorganizedconcern。Muchoftheincrementofcapital，orcapitalization，thatgoestothepromoterisscarcelydistinguishablefromanincreaseoftheliabilitiesofthenewcorporatione。g。preferredstock；andtheremaindere。g。commonstockhasalsosomeofthecharacteristicsofacreditinstrument。Itisworthnotingthatthecostofreorganization，includingthebonusofthepromoterandthefinancialagent，is，inthecommonrunofcases，addedtothecapitalization；thatistosay，asnearasthisclassoftransactionsmaybespokenofintermsborrowedfromtheold-fashionedbusinessterminology，whatanswerstothe“interest“duethecreditoronthecreditextensioninvolvedisincorporatedinthe“capital“ofthedebtor，withoutcircumlocutionorfaltering。23*
Thelinebetweencreditandcapital，orbetweendebtandproperty，inthevalueshandledthroughoutthesestrategicoperationsofcoalition，remainssomewhatuncertain。Indeed，theold-fashionedconceptsof“debt“and“property，“or“liabilities“
and“assets，“arenotfairlyapplicabletothefactsofthecase-except，ofcourse，inthewayofatechnicallegaldistinction。
Theold-fashionedlawandlegalpresumptionsandthenew-fashionedfactsandusagesarepartingcompany，atthispointaswellasatsomeothersintheaffairsofmodernbusiness。
Whensuchalargetransactioninthereorganizationofindustrialconcernshasbeencompleted，thevaluesleftinthehandsoftheformerownersoftheconcernsmergedinthenewcoalitionareonlytoafractionalanduncertainextentofthenatureofmaterialgoods。Theyareinlargepartdebentures，andmuchoftheremainderisofadoubtfulcharacter。Alargeproportionofthenominalcollectivecapitalresultinginsuchcasesismadeupofthecapitalizedgood-willoftheconcernsmerged。24*Thisgood-willischieflyacapitalizationofthedifferentialadvantagespossessedbytheseveralconcernsascompetitorsinbusiness，andisforthemostpartofnouseforotherthancompetitivebusinessends。Ithasforthemostpartnoaggregateindustrialeffect。Thedifferentialadvantagespossessedbybusinessconcernsascompetitorsdisappearwhenthecompetitorsaremerged，inthedegreeinwhichtheyceasetocompetewithrivalbiddersforthesamerangeofbusiness。Tothisaggregatedefunctgood-willoftheconsolidatedconcernswhichinthenatureofthingscanmakeonlyanimaginaryaggregateisaddedsomethinginthewayofanincrementofgood-willbelongingtothenewcorporationassuch；25*andthewholeisthenrepresented，approximately，bythecommonstockissued。Thenominalcapitaloftheconcernsmergedingoodpartbasedoncapitalizedgoodwillisaggregated，afteranappraisementwhichcommonlyequalizestheproportionofeachbyincreasingthenominalsharesofall。Thisaggregateiscoveredwithcommonandpreferredstock，chieflypreferred，whichisaclassofdebenturesissuedundertheformofcapital。Thestock，commonandpreferred，goestotheownersoftheconcernsmerged，andtothepromoterandthefinancialagent，asindicatedabove。
Incasebondsareissued，theselikewisegototheformerowners，insofarastheydonotreplaceoutstandingliabilitiesoftheconcernsmerged。
“Capital“intheenlightenedmodernbusinessusagemeans“capitalizedpresumptiveearning-capacity，“andinthiscapitalizationiscomprisedtheusufructofwhatevercreditextensionthegivenbusinessconcern’sindustrialequipmentandgood-willwillsupport。26*Byconsequencetheeffectualcapitalizationshownbythemarketquotationsascontrastedwiththenominalcapitalshownbytheparvalueofthestockofalldescriptionsfluctuateswiththefluctuationsoftheprevalentpresumptionastothesolvencyandearning-capacityoftheconcernandthegoodfaithofitsgoverningboard。
Whenthemoderncaptainofindustryreorganizesandconsolidatesagivenrangeofindustrialbusinessconcerns，therefore，andgivesthemacollectiveformandnameasanup-to-datecorporation，thecompletedoperationpresents，insyncopatedformandwithinanegligiblelapseoftime，allthatintricateprocessofcumulativeaugmentationofbusinesscapitalthroughtheuseofcreditwhichotherwisemaycomegraduallyinthecourseofbusinesscompetition。Atthesametimeitinvolvesaredistributionoftheownershipofthepropertyengagedinindustry，suchasotherwiseoccursataperiodofliquidation。
Theresultis，ofcourse，notthesameatallpoints，buttheequivalencebetweenthetwomethodsofexpandingbusinesscapitalanddistributingthegainsiscloseinsomerespects。Theresemblancesandthedifferencesbetweenthetwoprocesses，sofarasrelatestocredit，areworthnoticing。Thetrust-makerisinsomerespectsasurrogateforacommercialcrisis。
Whencreditextensionisusedcompetitivelyintheold-fashionedwayforincreasingthebusinessofcompetingconcerns，asspokenofabovepp。94-100，109-114，theexpansionofbusinesscapitalthroughcreditoperationsoccupiesaperiodofsomeduration，commonlyrunningoveranintervalrecognizedasaperiodofspeculativeadvanceor“risingprosperity。“Theexpansionofcapitalizedvaluesthentakesplacemoreorlessgraduallythroughacompetitiveenhancementofthepricesofindustrialequipmentandthelike。Thecreditorsthencommonlycomeinfortheirresultingshareintheindustrialequipmentonlyattheperiodofliquidation，withitsattendantshrinkageofvalues。Inthetimelesscredittransactionsinvolvedinthemodernreorganizationsofindustrialbusiness，ontheotherhand，thecreditors’claimtakeseffectwithoutanappreciablelapseoftime，aliquidation，orashrinkageofvalues。
Thewholeprocessofcreditextension，augmentationofbusinesscapital，anddistributionofproceedsisreducedtoaverysimpleform。Thecreditextensioniseffectedintwomainforms:athe“financing“undertakenbythecredithouseinconjunctionwiththepromoter，andbtheissuanceofdebentures。Thebonusofthefinancinghouseandpromoter，aswellasthedebentures，areallincludedintherecapitalization，togetherwithanincrementofgood-willandanyotherincidentalitemsofexpenseorpresumptivegain。Theresultingcollectivecapitalizationassetsandliabilitiesisthendistributedtotheseveralpartiesconcernedinthetransaction。Theoutcome，sofarastouchesthepresentargument，beingthatwhentheoperationiscompletedtheownershipoftherecapitalizedindustrialequipment，withwhateverotherpropertyisinvolved，appearsdistributedbetweentheformerowners，thepromotcr，andthecredithousewhichfinancedtheoperation。But，byvirtueofthedebenturesdistributed，theformerowners，togetherwiththeotherpartiesnamed，appearintheroleofcreditorsofthenewcorporationaswellasownersofit；theycommonlycomeoutofthetransactionwithlargeholdingsofpreferredstockorsimilardebenturesatthesametimethattheyholdthecoommonstock。Thepreferr。edstock，ofcourse，ispresentlydisposedofbythelargeholderstooutsideparties。Thematerialequipmentisthenpracticallythesameasitwasbefore；thebusinesscapitalhasbeenaugmentedtocomprisesuchproportionofthegoodwilloftheseveralconcernsincorporatedashadnotpreviouslybeencapitalizedandhypothecated，togetherwiththegood-willimputedtothenewcorporationandsuchdebenturesastheseitemsofwealthwillfloat。
Theeffectivecapitalizationresultingis，ofcourse，indicatedbythemarketquotationsofthesecuritiesissuedratherthanbytheirfacevalue。Thevalueofthecorporation’sbusinesscapitalsoindicatedneedsuffernopermanentshrinkage；
itwillsuffernoneifthemonopolyadvantagegood-willofthenewcorporationissufficienttokeepitsearning-capacityuptotherateonwhichthecapitalizationisbased。