By H. LAWRENCE WILSEY Cornell University All war and postwar periods are characterized by dynamic business and financial conditions. As the conditions become more and more dynamic, changes are accentuated that previously had been slowly taking place, and changes arise that previously had not existed. Experience is gained at a far more rapid pace than during periods of business stagnation, and the adjustments resulting from the increase in experience and knowledge take place in a far shorter period of time. At the present time one of these changes that has become significant in the field of corporation finance is the growing use of sinking fund provisions in preferred stock issues to provide for their retirement. While sinking funds have long been extensively used in bond retirement, their use in conjunction with preference shares, though not a newphenomenon, has grown to its present position at a markedly increasing rate only during the past few years. Of the preferred stocks initially offered during the past six years that were listed for trading on the New York Stock Exchange on January 1, 1947, over half contain sinking fund provisions. Taking the form of a contract between the corporation and the stockholders, the sinking fund provision generally provides that the corporation is to allocate earnings each year to a fund to be used to redeem a portion of the outstanding preferred stock. The ultimate goal of such a program is, of course, the removal of the preferred stock from the capital structure. What effect does this type of a provision have upon the nature of the preferred stock itself ? Historically the stockholders have been the owners of the corporate firm, and the bondholders, if any, have been the creditors. Preferred stock grew up between the pure common stock and the bond as a hybrid type. Sometimes it has possessed most of the rights of owners with many of the preferences over the common stock that had previously been retained for creditors, but more frequently, through the use of numerous limiting clauses in the stock contract, it has possessed few of either. As an ownership security preferred stock was at first looked upon, as common stock long had been, as an evidence of ownership that was to remain outstanding as long as the corporation retained its existence. While bonded indebtedness was generally designed to reach maturity after a specified period of time, ownership continued in the firm until the firm was itself liquidated. The com-