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Capital in Manufacturing and Mining: Its Formation and Financing

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This PDF is a selection from an out-of-print volume from the National Bureau of Economic Research Volume Title: Capital in Manufacturing and Mining: Its Formation and Financing Volume Author/Editor: Daniel Creamer, Sergei Dobrovolsky, and Israel Borenstein, assisted by Martin Bernstein Volume Publisher: Princeton University Press Volume ISBN: 0-870-14104-X Volume URL: http://www.nber.org/books/crea60-1 Publication Date: 1960 Chapter Title: Internal and External Financing Chapter Author: Daniel Creamer, Sergei P. Dobrovolsky, Israel Borenstein, Martin Bernstein Chapter URL: http://www.nber.org/chapters/c1392 Chapter pages in book: (p. 109 - 155) CHAPTER VI Internal and External Financing IN this part of the report, financial trends in manufacturing and in mining over the past half-century are reviewed. Attention is focused primarily on two aspects of the financial growth of these industries. In this chapter, long-run tendencies in internal and external financing are examined and compared. In the following chapter, the various debt and equity components of external financing are analyzed, and the trends in total debt and total equity (both from internal and external sources) are compared. At the outset, however, the basic concepts should be discussed and some technical terms defined. Concepts and Definitions It has become customary to refer to funds obtained through income retention as "internal financing." The amounts so designated will differ depending on the degree of netness or grossness desired. Here, "net income retention" (or net internal financing) will designate the undistributed net profit remaining in the business after dividend pay- ments. "Gross income retention" (or gross internal financing) will denote the amount of undistributed net profit plus depreciation and depletion allowances.' "External financing," will refer to funds ob- tained through new capital stock issues (external equity financing) and through various types of loans, e.g., b

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