Page:Walter Renton Ingalls - Wealth and Income of the American People (1924).pdf/235

Rh not of subsidiaries,” and “inventory.” The position of inventories was as follows:

In determining net earnings some of the corporations appear to have been conservative in writing off plant; others not so. In general I should say, however, that even where the writing off has been conservative it has been confined to what is really the use of plant, or better the consumption of plant, and was to only a slight extent, if any, for the discarding of surplus plant. The part of the working capital that is classed as investment securities is moreover open to more or less doubt. It comprises to some extent Liberty bonds carried at cost (par) but actually shrunk to 90 per cent or less, if regarded as a liquid asset, while other investment securities may have shrunk even more. However, even from these few data some important deductions may be made pretty surely.

1. The year 1916 was that of the greatest surplus. No one of these 140 companies distributed in dividends any more than it earned in the year. With the succeeding years deficits increased progressively. This reflects the common corporation policy of retaining a surplus as an equalizer and explains the maintenance of dividends in 1920 and 1921 after net earnings had ceased.

2. In 1921 there was a steadily increasing cessation of dividends, showing that the surpluses retained as equalizers were proving insufficient. This was because the larger part of the surpluses was in the inventory of goods, which had shrunk enormously in value. In