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

CORPORATION FINANCIAL REPORTS

Dollars lOO. OOO, OOO

90, OOO, OOO

SO, OOO, OOO

70, OOO, OOO

60, OOO, OOO

50, OOO, OOO

40, OOO, OOO

30, OOO, OOO