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 to recur, to distribute to the shareholders in dividend all the profit that has been earned for them. It is the usual practice for part of the profit earned to be held back by the directors and either put to reserve fund or added to the amount carried forward, or used to redeem debt. Redemption of debt evidently, by reducing the amount of interest that has to be met increases the future net income of the company; additions to reserves, or to the amount kept in hand and carried forward, mean that the company has larger funds at its disposal, to be invested either in the expansion of the business, and thereby of the profit, or in the acquisition of interests outside of it, that are thought likely to be profitable.

The consequence of this reserve fund policy, which is normal in well-conducted companies whose business is subject to fluctuation, is that the ordinary shareholder continually has part of his income saved for him, because the directors keep it and reinvest it for him. He is thus not only an investor, but also—generally without being aware of the fact—a chronic reinvestor. Very often he growls at the policy of the Board and considers that it is robbing him of money which might have been paid to him in dividends; in fact the Board is not robbing him at all, but keeping part of his money, which he would have