Jordan on Investments

obtained from the books listed in the bibliography previously referred to. The chapter "Tools of Investment" lists many other sources which have been drawn upon freely. The cordial treatment and uniform courtesy which the author received from many New York financial houses which permitted free access to their files helped in large measure to make the work complete.

The outline of a course of study in Investments prepared by the Investment Bankers' Association of America has been followed to a large extent in the presentation of the material in these pages.

The author desires to acknowledge in particular many helpful suggestions given by Miss Eleanor Kerr of Imbrie and Co. and by Mr. H. M. Jacoby.

New York University,

September, 1919.

DAVID F. JORDAN.

CONTENTS

CHAPTER I

ECONOMIC THEORY OF INVESTMENT

Capital a Necessity for Modern Business.-The Supply and

Reward of Capital.-All Savings Are Invested.—The Income

Has Two Parts.-Investment and Speculation Compared.—

Investment Must Be for Productive Purposes.-Invest-

ment Purpose is Income, not Appreciation.-Transfer of

Management.-True Interest Must Exceed Premium for

Risk.-Summary of Investment Requirements.

CHAPTER II

FORMS OF INVEstment SecurITIES

Major Investment Considerations.-Corporate Instruments.-
Stock Described.-Bond Described.-Par Value of Stocks
and Dividend Rates.-Part Paid Stocks.-Stock Assess-
ments. Common Stock.-Preferred Stock.-Effect of
Dividend Preferences.-Preference as to Assets.-Voting
Power of Preferred Stocks.-Redeemable Preferred.-Con-
vertible Preferred. Protected Preferred. — Guaranteed
Stock.-Debenture Stock.-Founders' Stock.-Deferred
Stock.-Dividends Paid at Discretion of Directors.-Divi-
dends Paid to Stockholders of Record.-Ex-dividend.—
Extra Dividends.-Dividends Other Than Cash.-Rights.-—
Classification of Bonds.-Combinations in a Single Security.

CHAPTER III

TESTS OF INVESTMENTS

Essentials of an Ideal Investment.-Safety of Principal.—

Satisfactory Income; Stability. Satisfactory Income;

Rate of Return.-Marketability.-Tax Position.-Freedom

from Care.-Satisfactory Duration.-Satisfactory Denomi-

nation.-Appreciation.-Summary.

PAGE

ΙΟ

CHAPTER IV

UNITED STATES GOVERNMENT BONDS

Increase Through War Financing.-Interest Bearing Debt.-

Can the Present Indebtedness Be Paid?-Wealth of the

United States.-Pre-War Issues.-2 Per Cent Consols of

1930.-4 Per Cent Loan of 1925.-Panama Canal Loan.—

Postal Savings Bonds.-3 Per Cent. Conversion Bonds.-

Certificates of Indebtedness.-War Finance Corporation

Bonds. Federal Farm Loan Bonds.-Liberty Bonds.-

First Liberty Loan.-Second Liberty Loan.-Third Liberty

Loan.-Fourth Liberty Loan.-Victory Loan.-General Pro-

visions. Summary of Liberty Loans.-Treasury Savings

Certificates.-Conclusion.

PAGE

CHAPTER V

STATE BONDS

States Are Sovereign Powers.-Repudiation of State Debts.-

Security in State Bonds.-Good Faith.-Financial Standing.

—Restrictions Upon State Debts.-Validity.-Tax Exemp-

tion.-Summary.

CHAPTER VI

MUNICIPAL BONDS

Municipalities Have Not Sovereign Power.-What Municipals

Constitute.-Tests of Municipals.-County Bonds in Gen-

eral.-First Test of County Bonds; Ability to Pay.—The

Second Test; Validity.-The Third Test; Good Faith.-

City Bonds in General.-City Bonds; Ability to Pay.-

Water Debt.-Prior Lien of City Bonds.-Relation of

Population to Ability to Pay.-Methods of Repayment;

Sinking Fund vs. Serial Payment.-Validity of City Bonds.

-Good Faith.-Tax Position of City Bonds.-Bonds of Tax

Districts. Conclusion.

CHAPTER VII

CORPORATE SECURITIES IN GENERAL

Volume of Corporate Securities.-Nature of Corporate Busi-

ness.-Nature of Business Risk.-Nature of the Business;

Stability.-Effect of Location.-The Investment Contract.

-Effect of Investment Contract.-Corporate Investments.

CHAPTER VIII

CORPORATION BONDS AS INVESTMENTS

Security of Corporate Bonds.-Senior and Junior Bonds.-

Valuation of Security.-Earning Power.-Comparative

STOCK AS AN INVESTMENT

May a Stock Be an Investment?-Types of Investment
Stocks.-Preferred Stock.-Guaranteed Stock.—Common
Stocks.-Potential Appreciation.-Risk.-Book Value.-
Relation of Price.-Relation of Taxation.-Conclusion..

CHAPTER X

RAILROAD SECURITIES

Railroad Industry in the United States.-Principal American

Railroads.-Short Names of Roads.-Railroad Reports.—

Importance of Geographical Location.-Other Factors in

Geographical Location.-The Income Statement.-Gross

Operating Revenue.-Commodity Statistics.-Measures of

Traffic Volume.-Distance Carried.-Car Loading.-Operat-

ing Expenses.-Maintenance of Way and Structures.-

Maintenance of Equipment.-Traffic Expenses.-Trans-

portation Expenses.-Miscellaneous Operations.-General

Expenses.-Net Operating Revenues.-Hire of Equipment.
-Non-operating Income.-Deductions from Gross Income.
-Net Income.-The Balance Sheet.-Importance of the
Balance Sheet.-Cost of Road and Equipment.-Invest-
ments.-Current Assets.-Other Assets.-Capitalization.-
Net Capitalization.-Other Liabilities.-Surplus.-Equip-
ment Bonds.-Terminal Bonds.-Government Operation..

CHAPTER XI

PUBLIC UTILITY SECURITIES

Investment Meaning of Public Utilities.—Capital Invested.

-Relation to the Public.-Public Utility Commissions.-

Holding Companies.-Operating Companies.-Essentials

of a Good Utility Investment.-Public Utilities as Legal

Investments.-Street Railways.-Water Works.-Gas Com-

panies. Electric Power Companies.-Hydro-Electric Com-

panies.-Relative Investment Rank.-Present Status of

Public Utilities.

III

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