OUTLAY AND INCOME 15 



These outlays, whether in form of services or purchases, must 

 be paid for by the proprietor at the time they are incurred, 

 either in money or credit. This evidently requires an addition 

 to the total capital invested, sufficient to meet all expenses 

 covering the period of installation or formation of the business, 

 or the time elapsing between outlay and income. If the income 

 is regular and continuous, this required capital ceases to increase 

 as soon as current income exceeds current outlay. But the sum 

 invested up to this point remains in the business, for whatever 

 portion may be paid back out of income an equal sum is at 

 once required to meet the expenses for which the corresponding 

 future income has not yet materialized. 



The capital required to meet these current expenses and carry 

 them continuously, thus bridging the gap between outlay and 

 income, is termed working or floating capital, in contrast to 

 that represented by more durable assets shown in the capital 

 account. 



For business in which income is realized only at long intervals, 

 expenses continue during the period, and the amount of working 

 capital tied up in wages and supplies increases rapidly to large 

 proportions, and is as suddenly decreased when the income is 

 received. Such a condition is represented by the business 

 of driving logs down streams. Contractors engaged in this 

 work receive their settlement when the logs reach their desti- 

 nation, which is once a year, while frequently a drive is hung 

 up and lays over a season. It was formerly the custom in some 

 states to transfer this indebtedness or outlay to the shoulders 

 of the laborers, who were paid in time checks made payable 

 in cash at a date subsequent to the probable delivery of the 

 drive. The men, being without capital, cashed these checks 

 at discounts which allowed the bankers or speculators who 

 furnished the funds to make very large profits. These profits 

 were in some cases split with the contractor who issued the checks. 

 Legislation has in most instances required cash payment of 

 wages, thus requiring the contractor to assume this obligation 

 and raise the necessary working capital. Where, as in the case 

 of forest plantations, the period elapsing between outlay and 



