Grand Forks herald. [volume] (Grand Forks, N.D.) 1916-1955, 1919-11-26
WEDNESDAY EVENING. NOVEMBER g. 1919.
PROFIT PERCENTAGE AGAIN

The federal trade commission having created what
fsppears TO b an tncurahyH distorted conception Of the
lrelation between proeits On capital and prices Of COM
modihes. In tn ssrss Of p<onouncsnents with reference
Ito the packing industry. fornner Secretary Of the Treasury
lMcAdoo comes forward In an effort to cinch the thing
Iby . similar statement concerning coal mining profits.
MI. McAdoo declares that the wage advances sus-
gested by the conference now in session at Washington
lars reasonable and such As the mining companies can
afford to pay. and that they can be paid merely by less
ening the unreasonable profits which the Companies have
been making during the war. tg
This statement may be entirely correct We do not
know whether It ID correct OF not. Perhaps Mr.. MoAdoo
does know. But the only statement Of fact which Mr..
McAdoo makes in support Of his allegation is not sum
Client, on which to base any opinion as to the reasonable
ness or unreasonableness Of prices. profits or wages.
MIR. McAdoo says that because Of his familiarity with
the income tax returns made by the coal companies. he
knows that their profits have been %e3orbitant running
all the way to IL per cent to 1000 per cent on their
capital stock. Leaving aside the ethics Of the course. of
"a man who. as q private citizen. makes public %confiden-
tial information which has come into his possession while
he was an officer Of the government. this statement means
just nothing at all. and any man with Mr. McAdoo's bust
ness experience knows It
AS in the packing industry. or any other. the public
is Interested. not in the percentage Of profits on capital
stock. but In the profits on turnover. the relation between
the buying and tho selling price OF goods. The case
seems so plain that it is difficult to see how any illustra-
ton can make It palmer. but an illustration in another
and a very familiar field may be used. "
A young man goes into the retail business-any
business-for himself. He has only q little money. but
his habits and character have given him excellent stand
ing with business people. He incorporates his business
with $1,000 capital. He buys only a little stock. but he
is so situated that he can renew it quickly. and he is
able to borrow when necessary. He developed a fine
trade. Customers flock to his store. He turns his little
capital over and over again, and at the end OF a year
he finds that all told he has paid out for goods. and in
necessary expenses 100000. and has received for his
goods $1o5.ooo. He has made a net profit of 5 per cent.
That looks moderate. But he has made a profit Of So
900 on a capital Of $1,000, or 500 per cent. Shocking!
That is merely one illustration out Of the thousands
which might be used, are many Of them from the actual
experience. Of business houses, to show that there II no
connection whatever between profits on capital stock
and reasonableness 'of prices. In relation to coal, the
people are interested, first, in being able to get the COM
modify when they need it, and second, in paying for it
a price which will include only a reasonable compensas
ton to the mine operator for the use Of his money and
the exercise of his skill and experience in handling it.
What ratio the profits bear to the capital investment is a
matter Of no consequence whatever. >