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316 and 1904 and again in 1911 and 1912. As the balance of earnings for the common stock in 1911 was only 5.9 per cent and in 1912 only 5.7 per cent, a continuance for another year of such narrow margin would probably have meant the reduction of the 5 per cent rate, especially in view of the reduced appropriations for new construction and betterments, as disclosed in Fig. 226. Fortunately, however, for the stockholders, conditions in 1913 improved enormously and 11.17 per cent was earned for the common stock. Considering only the figures charted here, it is evident that the earning power of the Corporation during 1912 was not maintained.

To answer the question "Is the property being kept in proper physical condition?" the chart shown by Fig. 226 has been constructed.

As seen from curve 7, depreciation and repairs have shown a fairly constant increase, the amount in both 1910 and 1912 exceeding that of 1907, although the gross earnings were larger in 1907 than in either 1910 or 1912. This is a satisfactory sign.

Curve 8 portrays the total amount of money invested in the construction of new plants, mills, etc. This curve reaches its height in 1907 (running up to $67,000,000) and represents in large part the creation of the great plant at Gary. Curve 8 shows that even the panic of 1907 failed to curtail new construction to any great extent. But the poor profits in 1912, coupled with the higher rate of dividend on the common stock, did produce a sharp contraction—from $50,000,000 in 1911 to less than $15,000,000 in 1912—the latter figure being the smallest since 1902. This, however, is not to be criticised too severely, since it is clear that a continuous expansion in productive capacity might easily outrun the normal consumptive demand.

Curve 9 represents the extent to which surplus earnings have been "ploughed back" into the property. This tells how the water has been squeezed out of the common stock. The report of the Bureau of Corporations in 1912 shows that, whereas there was a capitalization over indicated investment amounting to $625,353,559 in 1902, such excess was only $281,051,222 in 1910. Furthermore the report expressly states that this excess is not necessarily, nor entirely, "water". Up to 1908, curve 9 follows curve 8 very closely, indicating that the new construction was largely paid out of earnings, and not capitalized. Since 1907, there has been a tendency to finance such additions by the sale of bonds. This tendency, if not carried too far, is not open to criticism. One may, therefore, answer the second question in the