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 So I asked my friend and former colleague, Gilbert Layton of the Economist, who spends much of his time on company accounts, to see what would have happened to an investor who had, in 1910, invested in six industrial ordinary shares or stocks, with this principle to guide him.

The imaginary investor took the six companies which had put to reserve the largest proportion of their available balance, after payment of preference dividend, during the years 1905 to 1909. The accounts tested were those of concerns with a paid-up capital of £1 million and upwards, and companies paying an ordinary dividend of less than 5 per cent. were excluded. Some such limit is evidently essential; since otherwise a company which had fared so ill that it paid nothing, and carried forward all its small earnings, would be hailed as a model of good finance. The companies are shown in the order of the proportions reserved, the Eastern Telegraph having reserved the largest and Pease & Partners the smallest percentage of the six companies.

The price of purchase is assumed to be the middle price of December, 1910, thus giving the supposed investor time to make his investigation into the accounts of the companies for the