Weekly independent. [volume] (Elko, Nev.) 1887-1914, 1910-02-25
THE ARMOUR EARNINGS

In an interview published yesterday.
| Mr.. ]. Ogden Armour said that the
recent statement made by his firm, on
which we commented last month. says
an exchange, showed hat its net profits
did not exceed 0 per cent on the capital
Il include in the capital he added,
1.-THE accumulated surplus" On this
basis Mr.. Armour's figures are right.
The capital is 500, 900. 900. and the sur
plus $40. 900, 900. On this 800. 900, 900
the net receipts were a trifie over
s., 900, 900, which is less than 0 per cent.
But where did the tremendous surplus
of $40. 900, 900. accumulated i'll ten
years, come froml Manifestly, out of
earnings. And the earnings came out
of the people who have been paying the
high prices for beef. If a corporation
were permitted to count as earnings
only what it declared in dividends, it
could arrange matters 81 as to show no
earnings simply by refusing to declare
dividends.
For the year ending October % last
the Armours showed net earnings of
8, 1921, 900, and this was above all adj
ministrative expenses, including inter
est. II is said that the company has
not been IN the habit Of paying diyi.
dends, but that its net earnings have
been passed to surplus. In ten years
this surplus has been built up to S7O,-
900, 900. that is, it has grown at the
rate of $1,000, 900 a year. just about the
arnoun of the net earnings for the last
year. Thus the company has earned
above everything $4,000, 900 in ten
years, or more than three times the
amount Of its capital. For ten years
its net earnings have been 81 per cen
each year on its actual capital.
If Mr.. Armour chooses to add the
surplus to the capital when he figures
his earnings, that is his privilege. No
one cares what he does with his earn
ings. He may use them TO pay divi-
dends, use them To swell his surplus or
increase his capital. But they are
earnings just the same And when he
figures his rate Of ear nings on this
basis he is figuring earnings oil earn
ings. The swellcd surplus and the
increased capital have been built up
out of the prices which the people paid
for his prodcut. This is what has
It's property is now probably worth its
capitalization. But the people who
have paid its prices have given 70 the
property its added value. So with the
Armour case. The people do not care
what the Armours do with their earn
ings. All they are interested in is that
they be recognized as earnings, no
matter what is done with them. Ii the
ArmOurs should increase their capital
to 800. 0OO. 900 in order to make the
rate on the investment seem less
ex%horbitant. it would still be true that
the capital had been built up out of
net earnings. The money that is
used to increase the capital is not sub
scribed by the stockholders-it is
furnished by every of beef
and pork who uses the Armour pro.
ducts.
1t is to- be observed that Mr.. Armour
does not attempt to dodge behind the
distinction between dividends and
earnings. For in his interview he SAYS,
not that the dividends were 8 per cent,
but that the net receipts were per cent.
And 1t was the net receipts that were
passed to surplus. Net receipts,
whether they go to dividends, to capital
or to surplus, are still net receipts.
And Mr.. Armour gets his result of o
per cent OF capital" by figuring the
net receipts of one year ON the capital
plus the net receipts of former years.