Consequently the shareholders in a company run all the risks that
industrial enterprise is heir to, and the return, if any, that comes
into their pockets depends on the ability of the enterprise to earn
profits over and above all that it has to pay for raw material, wages
and other working expenses, all of which have to be met before the
shareholder gets a penny.

In order to meet the objections of steady-going investors to the risks
involved by thus becoming industrial adventurers, a system has grown up
by which the capital of companies is subdivided into securities that
rank ahead of one another. Companies issue debts, like public bodies, in
the shape of bonds or debenture stocks, which entitle the holders of
them to a stated rate of interest, and no more, and are often repayable
at a due date, by drawings or otherwise. These are the first charge on
the concern after wages and other working expenses have been paid, and
the shareholders do not get any profit until the interest on the
company's debt has been met. Further, the actual capital held by the
shareholders is generally divided into two classes, preference and
ordinary, of which the preference take a fixed rate before the ordinary
shareholders get anything, and the ordinary shareholders take the whole
of any balance left over. Sometimes, the preference holders have a
right to further participation after the ordinary have received a
certain amount of dividend, or share of profit, and there are almost
endless variations of the manner in which the different classes of
holders may claim to divide the profits, by means of preference,
preferred, ordinary, preferred ordinary, deferred ordinary, founders'
shares, management shares, etc., etc.

All these variations in the position of the shareholder, however, do not
alter the great essential difference between him and the creditor, the