Daily Kennebec journal. [microfilm reel] (Augusta, Me.) 1870-1975, 1926-09-20
Only Small Part of
Gross Receipts Put
In Cash Dividends

New YORK, sept. ian average OF
only three and a half cents out of
every dollar of gross receipts annually
of all the corporations in the United
States is applied to cash dividends
even in good years, according to an
analysis of corporate finances made by
the National Industrial Conference
Board, 247 Park Ave. Cash dividends
in 1928. the latest representative good
year for which data are available
ranged from an average Of z per cent
of total receipts among corporations
engaged in financial operations, such
as banks, insurance companies and the
like, to as low as an average of IL
per cent Of total receipts in wholesale
and retail trade. In the same year,
transportation and public utility COM
ranies disbursed 6.3 per cent of their
gross receipts as cash dividends,
while the manufacturing companies
total cash dividends amounted TO only
SO per cent of their total receipts.
Dividends paid by the mining industry,
while amounting to 81 per cent of
the companies aggregate receipts,
were paid almost entirely out of re-
serve funds, only one-ifth Of one per
cent of their total receipts represent
ing net profits for that year.
The total amount set aside in 1923
for improvements, expansion, making
up previous losses and other capital
reserves represented little more than
3 per cent of the total receipts of all
corporations and IS per cent was
charged to depreciation. This per
cent of gross receipts not disbursed
a S cash dividends also covers the item
of stock dividends which loom so
large in creating popular impress
sion of great prosperity in the case of
a few individual companies But the
relative importance OF such surplus
earnings, as regards the business of
the nation as whole. in the light of
the Conference Boards analysis OBJ
viously is very small, being only a
fractional portion OF per cent of to-
tai receipts.
BY far the greatest proportion of
the gross income, Sos per cent or
nearly nine-tenths of the total re-
ceipts of all corporations in 1923 went
into operating expenses, covering
wages, cost of materials, fuel, power
and supplies. officers salaries and mis-
cellaneous overhead expenses. Taxes
claimed 30 per cent, and interest on
borrowed capital rs per cent of the
total receipts
These figures, the Conference Board
points out, reflect the responsibility
resting on mana cement under the pre-
valling regime in which business de-
Ponds on large turnover with rela-
lively small profit per unit of sale. A
five per cent shrinkage in the volume
of sales of company doing no better
than the average, for instance, would
be sufficient to endanger the margin
of income available for dividends and
10 per cent drop in business activi-
ty could wipe out the entire net profit
and might even result in a substantial
deficit for the year, unless operating
expenses can be sufficiently and
promptly enough reduced to offset the
decrease in sales.
In the manufacturing industries.
wages, materials and supplies con-
sumo approximately 70.7 per cent of
the total receipts, while such fixed
charges as taxes, interest and depre-
citation in 1928 absorbed another 5.3
per cent. officers salaries II per cent
and miscellaneous overhead expenses
1862 per cent In times of declining
business activity therefore only those
industrial managers who were alert
as to the changing business trend
were able to effect the necessary econ /
omies in time to escape the necessity !
of reducing payrolls and of hazarding
profits.
Contrary to popular impression, the !
margin of total receipts representing !
net profits of corporations engaged in |
wholesale and retail trade is smaller |
than that in any other line of business !
activity. Il amounted to only 2.6 per |
cent in 1928. and strikingly reflects |
the prevailing tendency of large turn !
over at small profit per sale Only a |
little more than one per cent of total |
receipts was paid out as cash divi- |
dends in that year by trading corpo- |
rations,. Ia per cent of their gross in |
come representing earnings set aside /,
for expansion. improvements and to |
make up past losses.