everything else that contributes to that capacity. Valuations that are founded on market quotations or transactions between buyers and sellers, such as the reckoning of agricultural land, also include all the intangible wealth that pertains to those particular subjects, for in the last analysis buying and selling transactions reflect earning capacity. The value of a tract of farm land is determined by what somebody thinks it can be made to earn just as is the value of a mine.
On the other hand, valuations that represent simply the amount of capital invested such as that for manufacturing machinery have no relation to what that capital may be made to earn, or what in fact it does earn, and take no account of the intangible assets that may contribute largely to earning capacity.
If we could have a comparative tabulation of the average market value of all the business enterprises of the country and the physical property that they use in the prosecution of their business we could form some idea of the amount of the intangible wealth. We should find it to be very large, for in general the market value of the successful corporations is in excess of the value of their plant, inventories and cash resources. If the reverse is sometimes apparently the case, the explanation is likely to be that the physical property is overvalued. Failure to understand this condition may mislead investors. Thus, in the course of the great decline in the market value of corporate securities from the time of the armistice to the middle of 1921 it was frequently pointed out by writers in the financial papers that the market prices of the shares of certain companies had fallen below the book value per share of
