240	CORPORATION FINANCE
analysis of individual corporations would divide them into two classes. In
one group would be put those which intermittently issue bonds when their
stocks will not sell to advantage. These bonds, in turn, will be eliminated in
some manner as soon as conditions of the money market are favorable.
Where industrial corporations fail to put their finances in order so that they
can retire their bonds according to this pattern, we find examples of realiza-
tions short of expectations. The desire is present nevertheless. In the cases
of other industrial corporations, the issuance of bonds under any circum-
stances is the exception rather than the rule. Such corporations time their
financing and their expansion programs in such manner that they are usually
able to do their financing through the use of their accumulated earnings and
through the sale of stock.
Statistically, at least half of industrial bond issues look forward to their
redemption at maturity by providing in their indentures for sinking funds.
This ratio is apparently increasing. Short-term issues, in particular, follow
the pattern of anticipating repayment at or before maturity. Many such
issues are secured only by assets with a relatively short life, and therefore
it is not to be expected that they can be easily refunded. It is especially
common for industrial corporations with wasting assets to provide in their
bond indentures for definite means of using a part of the proceeds from their
normal operations to retire their bonded indebtedness.
Methods of Extinguishing Debt—Three methods of debt extinction are
available to corporations. Depending upon the bond contract or the consent
of the bondholders, all three methods may be available either at or before
the due date of the bonds. These methods are as follows:
 1.	Redemption—By this is meant payment of cash to the bondholders
in exchange for the bonds.   This may occur at maturity; at any previous
date by exercising the corporation's right to call the bonds, if it has such
right or acquires it by negotiation; or by purchase of the bonds in the market.
 2.	Refunding— This means issuing new bonds or other securities to take
the place of those outstanding.   The purchasers thereof may be existing
bondholders, in which case an exchange of bonds takes place; or other
investors may buy the new issue, in which case the corporation uses the
proceeds from its sale to redeem the bonds outstanding.
 3.	Conversion.—Conversion means the exchange of some other security,
usually stock, for the outstanding bonds.   Each owner of such securities has
the right to decide whether or not he wishes to make the exchange.
Purposes of Redemption.—Redemption of bonds at maturity requires no
explanation other than to say that by this means the corporation fulfills its
obligations to its bondholders. Redemption before maturity gives the cor-
poration some advantage that is not always made a part of the contract.
Conditions subsequent to the sale of the bond issue may induce redemption
before maturity. Whether the call privilege is exercised or the corporation