Evening journal., 1916-08-02
DIFFER ON MEANING
Of Working Capital
dupont Co. Directors Never
Set Aside Such a Fund,
Trial Shows
DEFENDANTS CLAIM
$5,OOO,OOO AVAILABLE

An interesting discussion OF what is
working capital" occupied great
zeal Of attention IN the Federnl Court
during the recent trial OF the dupont
stock suit East side OF the contro-
versy taking diametrlcalIy opposite
views of the facts. Judge Thompson
was in such doubt that counse, dur
ing their arguments. were questioned
several Times as TO just what was
meant by this term and Just what
amounts each thought could DC so
designated.
The charter Of the company pro
vides that the directors may set aside /
. "sum 20 be reserved over and above
IFS capital stock paid in as working
capital before declaring any dividends
among It's stockholders. All
sums reserved as working capital
may be applied from time 10 time to
the acquisitions or purchase OF its
bonds or other obligations or shares
Of its own capital stock"
The original idea OF this provision
was. on rs face. 10 divorce a fund
10 be known as working capital"
from surplus so that the stockholders
could not demand that dividends he
paid from H.
II was set forth in evidence during
the trial that the directors had never
exercised Their right to set aside a.
fund as working capital. There were
a great many other provisions In The
charter Of which the directors did not
take ADVANTAGE Under the terms Of
tho charter the company might have
built and operated a street railway, al
railroad, a grocery store, d wireless
telephone. or telegraph systenl-in
TACT Il might have gone irto almost
any line of business. but II did not
Nor did Il 40 into the business OF pur-
,hasina lis own stock or bonds Ak
.ept for purely corporate purposes
During all the years thai the New
Jersey corporation was in active bus
ness the item Of working capital
never appeared on the books. When
the plaintiffs in the case began to go
over the books and records OF the
company they found. in reports fur-
n'shed 10 the executive committee, the
total quick assets OF .ie company and
It's subsidiaries referred TO rs work
ug capital thus;
Cash
Accounts receivable CONNER
cian
Accounts TALL othersl
Rents receivable
Bills receivable
Materials and supplies
Finished product
Deferred charges, etc.
Total working capital.
Financial authorities cite numerous
instances where this same term US
nsed IN the same way by other cor
porcsions. meaning the quick assets
available for the day by day require
nents Of the company
These same authorities point out
that the item OF working capital pro-
vided for IN a great many charters
IS a very different thing-a sum set
aside out Of tho surplus
With this blank In hand the plain
tins i'm the DUPONT case put forth the
claim that the total as set forth was
working capital in the sense that the
charter Intended az the same time
admitting the surplus was n much
smaller amount They argued that
the directors might, II they so de-
sired. dispose OF any Of these items
going TO make up the total and with
the proceeds purchase their own COM
mon stock
This carried 10 the logical concur
sion--it was pointed out by the de-
fendants-would mean that the direc-
tors might. II they so desired, sell of
their raw materials or their uncom-
pleted product or the material for
construction or repair work. or any
thing else which appeared on this
sheet and with the proceeds purchase
the stock.
There was a great divergence of
opinion between the opposing counsel
right here The plaintiffs contended
that there was available for the pur-
chase of stock nearly S1O0000000. The
defendants insisted that when the
liabilities OF capital stock are CHARGED
of the total assets there was total
OF only s5000000 Of surplus out OF
which 20 purchase the Si4,000.000 OF
stock in question.
Emphasis was laid on the state
ment that there was no working cap
ital SET apart under the terms OF the
charter. and that the mere fact that
this same expression was used in the
consolidated reports did not make
funds available.