Wilson F. Payne

English

Research Papers in Economics

This PDF is a selection from an out-of-print volume from the National
Bureau of Economic Research
Volume Title: Industrial Demands upon the Money Market, 1919-57:
A Study in Fund-Flow Analysis
Volume Author/Editor: Wilson F. Payne
Volume Publisher: NBER
Volume ISBN: 0-87014-420-0
Volume URL: http://www.nber.org/books/payn61-1
Publication Date: 1961
Chapter Title: Financing Total Assets
Chapter Author: Wilson F. Payne
Chapter URL: http://www.nber.org/chapters/c5016
Chapter pages in book: (p. 36 - 44).2
FinancingTotal Assets
CHANNELS OF ASSET FLOWS
Confined as it is to the reporting of events which are reflected on the
liability side of the balance sheet, the analysis of additions to and reduc-
tions in total assets lacks the penetrating power of the cash fund to reveal
the causes of a company's contact with the money market. Nevertheless,
the analysis is extremely useful in its own right for providing exact reports
on the means of company growth and the process of
In classifying the transactions which either add to or diminish a com-
pany's total assets, only two main channels of fund flow will be traced:
those of operating and of money-market transactions, as reported in Table
4. Since the headings in this case differ from those given for the flow of
cash (Table i), a brief explanation is in order. The whole class of capital
budget transactions, which appeared in the cash statement, is omitted
from the report of asset flows, since plant expenditures and advances to
subsidiaries or others are conversions of, rather than additions to, total
assets. Gains or losses, however, on the disposition of noncurrent assets
are reflected here as income. In the money-market account only transac-
tions in company obligations are reported, including instalment notes
issued for equipment; transactions in marketable securities are omitted
on the ground that they, too, involve only a conversion of assets. Among
the operating transactions only the net income before taxes is reported,
because that is all that is added after the sales have been offset by their
costs—a mere conversion of one asset into another, in the same way that
plant is converted to cash or receivables by the amount of depreciation
charged. Unpaid vendors of materials or services add to the assets. In a
1.Itmay be pointed out that the measurement of the expansion or contraction of total
assets refers to dollar amounts only. We are not here concerned with the purchasing
power of the dollar, nor with the relative productivity of a dollar's worth of new plant
put in place.
36Financing Total Assets
TABLE 4
TRANSACTIONS AFFECTING TOTAL ASSETS, ALLIS-CHALMERS MANUFACTURING
COMPANY, 1948 AND 1949
(thousands of dollars)
1948 1949
Dr. Cr. Dr. Cr.
Operations
Net income before taxes
Vendors
Tax payment
Dividend payment
3,365
5,193
26,242
8,759 22,091
10,934
6,199
33,205
Subtotal
Subtotal difference
8,558 35,001 39,224 33,205
6,019 26,443
Money-market transactions
Notes payable, short-term
Notes payable, long-term
Bonds
Preferred stock
Common stock
15,000
10,000
0
0
0
(15,000) 453
(15,000)
0
0
0
Subtotal
Subtotal difference
0 25,000 0 453
453 25,000
Total payments and total receipts
Effect on total assets
8,558 60,001 39,224 33,658
5,566 51,443
Annual reports of the company. Payments are entered in debit column;
receipts, in credit column.
year when the consumption of materials is retarded, vendors will be paid
ofF; and this will diminish assets. Taxes, when paid, constitute a drain on
assets; and so do dividend payments.
Therefore, in 1948, when vendors and profits added $35,001,000 and
dividends and taxes took away $8,558,000, operations added $26,443,000,
net, to Allis-Chalmers' total assets. Further, the company borrowed $25
million in short- and long-term loans. This amount, combined with that
derived from operations, accounts for the over-all increase of $51,443,000.
in 1949, assets were diminished on operating account alone. An increase
37Financing Total Assets
CHART6
Effect of Operations and of Money-Market Transactions on Total Assets,
Allis-Chalmers Manufactu ring Company, 1937-57
58
of dollars
—60
0.
a)
C)
a)
I-0
U)
U,
a)
U
LLi
'I,
C
a)
E
0
0.*0
U)
U,
a)
C-,
Lu
SouRcE: TableFinancing Total Assets
of dividends, the payment of the large income tax bill for 1948, and the
shift of vendors to the debit (payment) side as materials were being con-
sumed at a lower rate, all combined to outbalance the profits figure.
ONE COMPANY'S EXPERIENCE, 1937-57
In Chart 6 (based on the figures in Tableshownat the end of this
chapter) net flow via the two main channels by which the assets of Allis-
Chalmers were augmented or diminished is shown for 1937-57.Sinceit is
not our purpose here to study in any great detail the movement of total
assets in relation to the business cycle, observation of the processes by
which the company's resources grew or diminished will be directed only
to this twenty-one-year period.
In the expansion of 1937,asthe chart makes plain, both operations and
the money market provided the means. The contraction of 1938 and the
expansions in 1939 and 1940wereeffected through operations alone. From
then on through 1944,bothoperations and the money market contributed
to the company's expansion. The liquidation of war production at the
end of 1945broughta sharp contraction of assets via the reduction of
current trade and tax liabilities and the repayment of debt. In 1946,
income losses and the continuing reduction of current liabilities again
pulled assets down, notwithstanding a tax credit and the net sale of
common stock. However, the postwar expansion was under way even in
this year; but it did not become manifest in year-end figures until 1947-48.
In 1947,operations,mainly through the expansion of current trade lia-
bilities, accounted for all of the growth; in 1948, operations and the money
market contributed approximately equal amounts. Despite a higher in-
come in 1949thanin the previous year, the reduction in the rate of pur-
chases from suppliers brought a huge reduction in current liabilities. This
and the payment of the high 1948 tax bill accounted, in the main, for the
diminution of assets during 1949.
Inthe twenty-one years from January 1937 through December 1957,
operationscontributed 45 per cent of the company's expansion and the
money market 55 per cent. In the latter, debt and equity shared almost
equally.
39T
A
B
L
E
 
5
P
A
Y
M
E
N
T
S
 
A
N
D
 
R
E
C
E
I
P
T
S
 
O
F
 
T
O
T
A
L
 
A
S
S
E
T
S
,
 
A
L
L
I
S
-
C
H
A
L
M
E
R
S
 
M
A
N
U
F
A
C
T
U
R
I
N
G
 
C
O
M
P
A
N
Y
,
 
1
9
3
7
-
5
7
(
t
h
o
u
s
a
n
d
s
 
o
f
 
d
o
l
l
a
r
s
)
1
9
3
7
1
9
3
8
1
9
3
9
D
r
.
1
9
4
0
C
r
.
D
r
.
C
r
.
D
r
.
C
r
.
D
r
.
C
r
.
O
p
e
r
a
t
i
o
n
s
N
e
t
 
i
n
c
o
m
e
 
b
e
f
o
r
e
 
t
a
x
e
s
V
e
n
d
o
r
s
T
a
x
p
a
y
m
e
n
t
D
i
v
i
d
e
n
d
 
p
a
y
m
e
n
t
1
,
8
4
0
6
,
2
0
3
1
0
,
8
4
7
5
,
5
1
6
4
,
1
3
1
2
,
8
3
6
2
,
6
6
3
3
,
5
3
4
9
3
3
2
,
2
2
0
5
,
9
2
9
1
,
8
0
6
1
,
2
6
8
2
,
6
6
4
8
,
6
7
8
2
,
3
3
4
S
u
b
t
o
t
a
l
s
S
u
b
t
o
t
a
l
 
d
i
f
f
e
r
e
n
c
e
8
,
0
4
3
1
6
,
3
6
3
9
,
6
3
0
3
,
5
3
4
3
,
1
5
3
7
,
7
3
5
3
,
9
3
2
1
1
,
0
1
2
7
,
0
8
0
6
,
0
9
6
8
,
3
2
0
4
,
5
8
2
M
o
n
e
y
-
m
a
r
k
e
t
 
t
r
a
n
s
a
c
t
i
o
n
s
N
o
t
e
s
 
p
a
y
a
b
l
e
,
 
s
h
o
r
t
-
t
e
r
m
N
o
t
e
s
 
p
a
y
a
b
l
e
,
 
l
o
n
g
-
t
e
r
m
B
o
n
d
s
P
r
e
f
e
r
r
e
d
 
s
t
o
c
k
C
o
m
m
o
n
 
s
t
o
c
k
2
,
1
0
0
2
5
,
3
2
5
1
4
5
1
1
S
u
b
t
o
t
a
l
s
S
u
b
t
o
t
a
l
 
d
i
f
f
e
r
e
n
c
e
2
,
1
0
0
2
5
,
4
7
0
0
1
1
0
0
0
0
1
1
2
3
,
3
7
0
T
o
t
a
l
 
p
a
y
m
e
n
t
s
 
a
n
d
 
t
o
t
a
l
 
r
e
c
e
i
p
t
s
E
f
f
e
c
t
 
o
n
 
t
o
t
a
l
 
a
s
s
e
t
s
1
0
,
1
4
3
4
1
,
8
3
3
9
,
6
3
0
3
,
5
4
5
3
,
1
5
3
7
,
7
3
5
3
,
9
3
2
1
1
,
0
1
2
7
,
0
8
0
6
,
0
8
5
3
1
,
6
9
0
4
,
5
8
2
0C
.
,
1
9
4
1
1
9
4
2
1
9
4
3
D
r
.
1
9
4
4
C
r
.
D
r
.
C
r
.
D
r
.
C
r
.
D
r
.
C
r
.
O
p
e
r
a
t
i
o
n
s
N
e
t
 
i
n
c
o
m
e
 
b
e
f
o
r
e
 
t
a
x
e
s
V
e
n
d
o
r
s
T
a
x
p
a
y
m
e
n
t
D
i
v
i
d
e
n
d
 
p
a
y
m
e
n
t
2
,
2
7
5
2
,
6
6
4
1
5
,
6
8
9
5
,
8
4
8
8
,
0
9
3
1
,
7
7
6
2
8
,
5
9
5
9
,
0
3
1
1
7
,
6
9
3
2
,
2
2
0
4
5
,
2
5
6
2
5
,
2
4
8
3
5
,
1
6
8
3
,
6
9
7
5
4
,
8
5
3
1
,
8
6
1
S
u
b
t
o
t
a
l
s
S
u
b
t
o
t
a
l
 
d
i
f
f
e
r
e
n
c
e
4
,
9
3
9
2
1
,
5
3
7
9
,
8
6
9
3
7
,
6
2
6
1
9
,
9
1
3
7
0
,
5
0
4
3
8
,
8
6
5
5
6
,
7
1
4
1
7
,
8
4
9
5
0
,
5
9
1
1
6
,
5
9
8
2
7
,
7
5
7
i
v
I
o
n
e
y
-
i
n
a
r
k
e
t
 
t
r
a
n
s
a
c
t
i
o
n
s
N
o
t
e
s
 
p
a
y
a
b
l
e
,
 
s
h
o
r
t
-
t
e
r
m
N
o
t
e
s
 
p
a
y
a
b
l
e
,
 
l
o
n
g
-
t
e
r
m
B
o
n
d
s
P
r
e
f
e
r
r
e
d
 
s
t
o
c
k
C
o
m
m
o
n
 
s
t
o
c
k
1
0
,
9
0
8
3
,
0
0
0
9
,
2
5
0
3
,
0
0
0
2
5
,
7
5
0
1
5
,
0
0
0
1
0
,
0
0
0
1
5
,
6
2
7
2
8
,
9
9
3
S
u
b
t
o
t
a
l
s
S
u
b
t
o
t
a
l
 
d
i
f
f
e
r
e
n
c
e
1
0
,
9
0
8
1
2
,
2
5
0
3
,
0
0
0
2
5
,
7
5
0
0
1
5
,
0
0
0
2
5
,
6
2
7
2
8
,
9
9
3
3
,
3
6
6
2
2
,
7
5
0
1
5
,
0
0
0
1
,
3
4
2
T
o
t
a
l
 
p
a
y
m
e
n
t
s
 
a
n
d
 
t
o
t
a
l
 
r
e
c
e
i
p
t
s
E
f
f
e
c
t
 
o
n
 
t
o
t
a
l
 
a
s
s
e
t
s
1
5
,
8
4
7
3
3
,
7
8
7
1
2
,
8
6
9
6
3
,
3
7
6
1
9
,
9
1
3
8
5
,
5
0
4
6
4
,
4
9
2
8
5
,
7
0
7
5
0
,
5
0
7
1
7
,
9
4
0
0T
A
B
L
E
 
5
 
(
C
o
n
t
i
n
u
e
d
)
I
.
1
9
4
5
1
9
4
6
1
9
4
7
D
r
.
1
9
4
8
C
r
.
D
r
.
C
r
.
D
r
.
C
r
.
D
r
.
C
r
.
O
p
e
r
a
t
i
o
n
s
N
e
t
 
i
n
c
o
m
e
 
b
e
f
o
r
e
 
t
a
x
e
s
V
e
n
d
o
r
s
T
a
x
 
p
a
y
m
e
n
t
D
i
v
i
d
e
n
d
 
p
a
y
m
e
n
t
1
1
,
8
9
4
4
4
,
8
7
5
4
,
3
4
0
2
3
,
1
9
9
2
5
,
8
0
4
1
6
,
4
8
0
4
,
3
1
6
1
0
,
1
3
4
a
5
,
1
9
2
9
,
0
7
2
1
2
,
6
2
8
3
,
3
6
5
5
,
1
9
3
2
6
,
2
4
2
8
,
7
5
9
S
u
b
t
o
t
a
l
s
S
u
b
t
o
t
a
l
 
d
i
f
f
e
r
e
n
c
e
6
1
,
1
0
9
2
3
,
1
9
9
4
6
,
6
0
0
1
0
,
1
3
4
5
,
1
9
2
2
1
,
7
0
0
8
,
5
5
8
3
5
,
0
0
1
2
6
,
4
4
3
3
6
,
4
6
6
3
7
,
9
1
0
1
6
,
5
0
8
M
o
n
e
y
-
m
a
r
k
e
t
 
t
r
a
n
s
a
c
t
i
o
n
s
N
o
t
e
s
 
p
a
y
a
b
l
e
,
 
s
h
o
r
t
-
t
e
r
m
N
o
t
e
s
 
p
a
y
a
b
l
e
,
 
l
o
n
g
-
t
e
r
m
B
o
n
d
s
P
r
e
f
e
r
r
e
d
 
s
t
o
c
k
C
o
m
m
o
n
 
s
t
o
c
k
1
4
,
4
2
8
1
3
2
5
,
5
7
2
1
4
,
9
6
2
1
7
,
3
2
9
1
7
,
6
7
8
1
5
,
0
0
0
1
0
,
0
0
0
S
u
b
t
o
t
a
l
s
S
u
b
t
o
t
a
l
 
d
i
f
f
e
r
e
n
c
e
1
4
,
4
4
1
0
2
5
,
5
7
2
4
9
,
9
6
9
0
0
0
2
5
,
0
0
0
2
5
,
0
0
0
1
4
,
4
4
1
2
4
,
3
9
7
T
o
t
a
l
 
p
a
y
m
e
n
t
s
 
a
n
d
 
t
o
t
a
l
 
r
e
c
e
i
p
t
s
E
f
f
e
c
t
 
o
n
 
t
o
t
a
l
 
a
s
s
e
t
s
7
5
,
5
5
0
2
3
,
1
9
9
7
2
,
1
7
2
6
0
,
1
0
3
5
,
1
9
2
2
1
,
7
0
0
8
,
5
5
8
6
0
,
0
0
1
5
1
,
4
4
3
1
2
,
0
6
9
5
2
,
3
5
1
1
6
,
5
0
80
C
j
O
1
9
4
9
1
9
5
0
1
9
5
1
1
9
5
2
D
r
.
C
r
.
D
r
.
C
r
.
D
r
.
C
r
.
D
r
.
C
r
.
O
p
e
r
a
t
i
o
n
s
N
e
t
 
i
n
c
o
m
e
 
b
e
f
o
r
e
 
t
a
x
e
s
V
e
n
d
o
r
s
T
a
x
 
p
a
y
m
e
n
t
D
i
v
i
d
e
n
d
 
p
a
y
m
e
n
t
2
2
,
0
9
1
1
0
,
9
3
4
6
,
1
9
9
3
3
,
2
0
5
1
3
,
8
8
9
9
,
3
4
5
4
7
,
0
2
0
6
,
6
1
0
2
3
,
1
8
2
1
0
,
0
5
0
6
9
,
9
1
7
1
0
,
5
4
2
3
,
1
3
2
4
8
,
0
2
2
1
2
,
0
6
0
6
5
,
9
8
3
S
u
b
t
o
t
a
l
s
S
u
b
t
o
t
a
l
 
d
i
f
f
e
r
e
n
c
e
3
9
,
2
2
4
3
3
,
2
0
5
2
3
,
2
3
4
5
3
,
6
3
0
3
3
,
2
3
2
8
0
,
4
5
9
6
3
,
2
1
4
6
5
,
9
8
3
2
,
7
6
9
6
,
0
1
9
3
0
,
3
9
6
4
7
,
2
2
7
M
o
n
e
y
-
m
a
r
k
e
t
 
t
r
a
n
s
a
c
t
i
o
n
s
N
o
t
e
s
 
p
a
y
a
b
l
e
,
 
s
h
o
r
t
-
t
e
r
m
N
o
t
e
s
 
p
a
y
a
b
l
e
,
 
l
o
n
g
-
t
e
r
m
B
o
n
d
s
P
r
e
f
e
r
r
e
d
 
s
t
o
c
k
C
o
m
m
o
n
 
s
t
o
c
k
(
1
5
,
0
0
0
)
4
5
3
(
1
5
,
0
0
0
)
4
5
3
7
,
0
0
0
3
3
2
6
,
0
0
0
2
3
5
5
,
0
0
0
4
2
,
0
0
0
2
2
2
S
u
b
t
o
t
a
l
s
S
u
b
t
o
t
a
l
 
d
i
f
f
e
r
e
n
c
e
0
4
5
3
7
,
4
5
3
3
3
0
2
6
,
2
3
5
0
4
7
,
2
2
2
4
7
,
2
2
2
2
6
,
2
3
5
4
5
3
7
,
4
2
0
T
o
t
a
l
 
p
a
y
m
e
n
t
s
 
a
n
d
 
t
o
t
a
l
 
r
e
c
e
i
p
t
s
E
f
f
e
c
t
 
o
n
 
t
o
t
a
l
 
a
s
s
e
t
s
3
9
,
2
2
4
3
3
,
6
5
8
3
0
,
6
8
7
5
3
,
6
6
3
3
3
,
2
3
2
1
0
6
,
6
9
4
6
3
,
2
1
4
1
1
3
,
2
0
5
4
9
,
9
9
1
7
3
,
4
6
2
5
,
5
6
6
2
2
,
9
7
6T
A
B
L
E
 
5
 
(
C
o
n
c
l
u
d
e
d
)
o
 
T
a
x
r
e
c
o
v
e
r
y
 
c
l
a
i
m
 
i
n
 
e
x
c
e
s
s
 
o
f
 
t
a
x
 
p
a
y
m
e
n
t
s
.
S
O
T
J
a
C
E
:
 
A
n
n
u
a
l
 
r
e
p
o
r
t
s
 
o
f
 
t
h
e
 
c
o
m
p
a
n
y
.
 
P
a
y
m
e
n
t
s
 
a
r
e
 
e
n
t
e
r
e
d
 
i
n
 
d
e
b
i
t
 
c
o
l
u
m
n
;
 
r
e
c
e
i
p
t
s
,
 
i
n
 
c
r
e
d
i
t
 
c
o
l
u
m
n
.
0
D
r
.
1
9
5
3
C
r
.
D
r
.
C
r
.
D
r
.
1
9
5
5
C
r
.
D
r
.
1
9
5
6
C
r
.
1
9
5
7
D
r
.
C
r
.
O
p
e
r
a
t
i
o
n
s
N
e
t
 
i
n
c
o
m
e
 
b
e
f
o
r
e
 
t
a
x
e
s
V
e
n
d
o
r
s
T
a
x
 
p
a
y
m
e
n
t
D
i
v
i
d
e
n
d
 
p
a
y
m
e
n
t
2
,
4
5
4
4
1
,
1
5
0
1
2
,
8
5
5
4
3
,
4
4
8
9
1
3
2
1
,
4
1
6
1
4
,
5
2
6
5
0
,
0
1
2
3
1
,
1
8
9
1
6
,
4
6
8
5
0
,
3
4
1
1
8
,
5
2
0
4
,
6
4
9
2
8
,
2
5
4
1
6
,
6
8
0
4
2
,
8
0
5
7
,
0
8
0
2
3
,
5
6
0
1
6
,
8
4
0
3
5
,
1
4
4
S
u
b
t
o
t
a
l
s
5
6
,
4
5
9
4
3
,
4
4
8
3
6
,
8
5
5
5
0
,
0
1
2
4
7
,
6
5
7
6
8
,
8
6
1
4
9
,
5
8
3
4
2
,
8
0
5
4
7
,
4
8
0
3
5
,
1
4
4
S
u
b
t
o
t
a
l
 
d
i
f
f
e
r
e
n
c
e
1
3
,
0
1
1
1
3
,
1
5
7
2
1
,
2
0
4
6
,
7
3
3
1
2
,
3
3
6
M
o
n
e
y
-
m
a
r
k
e
t
 
t
r
a
n
s
a
c
t
i
o
n
s
N
o
t
e
s
 
p
a
y
a
b
l
e
,
 
s
h
o
r
t
-
t
e
r
m
N
o
t
e
s
 
p
a
y
a
b
l
e
,
 
l
o
n
g
-
t
e
r
m
B
o
n
d
s
P
r
e
f
e
r
r
e
d
 
s
t
o
c
k
C
o
m
m
o
n
 
s
t
o
c
k
3
,
7
5
0
1
0
4
1
8
,
0
0
0
5
,
7
5
0
3
4
,
8
8
5
2
4
3
2
5
0
2
8
2
2
5
0
5
0
,
0
0
0
4
6
7
2
8
,
0
0
0
2
5
0
2
7
7
S
u
b
t
o
t
a
l
s
3
,
7
5
0
1
0
4
1
8
,
0
0
0
4
0
,
8
7
8
2
5
0
2
8
2
2
5
0
5
0
,
4
6
7
2
8
,
2
5
0
2
7
7
S
u
b
t
o
t
a
l
 
d
i
f
f
e
r
e
n
c
e
3
,
6
4
6
2
2
,
8
7
8
3
2
5
0
,
2
1
7
2
7
,
9
7
3
T
o
t
a
l
 
p
a
y
m
e
n
t
s
 
a
n
d
 
t
o
t
a
l
 
r
e
c
e
z
p
t
s
6
0
,
2
0
9
4
3
,
5
5
2
5
4
,
8
5
5
9
0
,
8
9
0
4
7
,
9
0
7
6
9
,
1
4
3
4
9
,
8
8
3
9
3
,
2
7
2
7
5
,
7
3
0
3
5
,
4
2
1
E
f
f
e
c
t
 
o
n
 
t
o
t
a
l
 
a
s
s
e
t
s
1
6
,
6
5
7
3
6
,
0
3
5
2
1
,
2
3
6
4
3
,
4
3
9
4
0
,
3
0
9

Industrial Demands upon the Money Market, 1919-57: A Study in Fund-Flow Analysis

Abstract

Similar works

Full text

Available Versions

Research Papers in Economics