Summary
This book addresses the complex task of valuing companies, particularly public utilities, by focusing on how to measure and manage their worth. It acknowledges the difficulty in defining valuation elements like "going value," "property used and useful," and "cost of the service." A key point is that the cost of establishing a business on a profitable basis, including unearned depreciation and interest on investment prior to profitability, can be considered a legitimate part of the active property's value. The book explores methods for this valuation, emphasizing the need for scientific determination of reasonableness and a scientific approach by commissions tasked with supervision and rate-setting.
The work grapples with the challenges of fair valuation, noting that relying solely on reproductive cost less depreciation can be unfair and constitutionally questionable. It highlights the experimental nature of laws designed for such valuations and the extensive research and care required. The passages suggest a system of uniform accounting for construction and depreciation accounts is crucial. Ultimately, the book aims to provide a structured understanding of how to approach company valuation, recognizing the intricate factors involved in determining a company's monetary worth and the potential for shifting burdens when issues arise.
Key concepts
- Going value — The value derived from the cost incurred in converting property from a static to a dynamic state, forming the monetary measure of a business's profitability.
- Property used and useful — A component in valuation that refers to the assets actively employed in the business's operations.
- Cost of the service — A valuation element that considers the expenses involved in providing a service, often discussed in the context of rate-setting.
- Unearned depreciation — A portion of depreciation that has accumulated before revenue can cover it, considered a legitimate charge in fixing rates.
- Unearned interest on the investment — Interest accrued on capital invested in a business before it becomes profitable, potentially includable in valuation.
- Reproductive cost less depreciation — A valuation method that uses the cost to replace an asset minus its accumulated depreciation.
Popular questions readers ask
- "To the hard-handed men...and to the legislators, always criticised and never praised." What does this dedication reveal about Charles McCarthy's perspective on societal value, and how might it foreshadow the core principles or goals of "The Wisconsin Idea"?
- Charles McCarthy was Chief of the Wisconsin Legislative Reference Department, and the bibliography lists recent Wisconsin laws. How might his professional role and the specific legislative topics referenced in the appendix indicate the practical, applied nature of "The Wisconsin Idea"?
- Examine the specific areas of legislation in the bibliography (e.g., child labor, corrupt practices, industrial education). What overarching social or political problems was "The Wisconsin Idea" likely designed to address based on these legislative focuses?
- Given that "The Wisconsin Idea" was published in 1912 and its author was a legislative chief, how might this book have served as both a reflection of and a potential catalyst for progressive reforms of its era?
- Based solely on the introductory elements (dedication, author's background, bibliography entries), what can you infer about the fundamental relationship between government, academia, and the public that "The Wisconsin Idea" likely champions?