The people's voice. [volume] (Helena, Mont.) 1939-1969, 1942-12-04

World War II, business as a whole
has made larger profits this time. In
1917 aggregate profits before taxes
for all corporations reporting net in
come totaled Sill billions, including
dividends. This was the top year, and
compares with estimated $15.5 billions
in 1871 ($17.5 including dividends)
and still more this year. Profits
after taxes for corporations reporting
net income in 1916 and 1917 both
came to about 50 billions. This COM
pares with estimates of 1913 billions
in 1910, S10.9 billions in 1871, and in
1912 a net after taxes which will be,
at the very least, greater than the
1936-1939 yearly average. lin this
paragraph for comparison with 1916
and 1917 data, figures are for profits
including dividends, whereas in the
preceding paragraph dividends are ex-
cluded.)
Even if an excess profits tax of 900
is enacted and normal taxes plus sur
taxes are fixed at 45%o, it is expected
American corporations will earn near
ly Sc billions excluding dividends aft
er taxes in 1912. In few years of our
commercial history were these better
than average earnings surpassed. This
can hardly be called sacrifice.
But when it is remembered that the
distribution of war business is ex-
ceeding uneven, the picture appears
less flattering to the large manufac-
turers who dominate your organiza-
ton II the many thousands of mem
bers in your group could share equit-
ably with the big fellows, the position
Of small business might be more fav-
orable. One hundred companies hold
about three-fourths of all primary war
supply contracts. Yet many of your
members will have to fold up because
contracts have not been evenly dis
tributed, and because their civilian
markets will all but disappear The
reverse side of that picture is one of
extraordinary returns for the war
profiteers.
l am afraid that in compiling your
booklet 1.-THE Record of Manufactur-
ing Profits" which you were kind
enough to send me for my edification,
your organization has fallen into a
common error of uniformed persons,
and of some informed persons who
choose not to see the facts. Every
student of investment knows that
company reports require analysis to
get at the true financial picture, and
cannot be taken at face value. Num-
erous accounting devices are en-
ployed today to conceal the true profit
picture. In the first three quarters of
1912, exorbitant reserves were set up
for federal taxes by many companies.
Heavy amortization of new plant ia
cilities created less favorable pic
ture than the facts warranted. In
other cases, inflated capital values
were employed to make earnings seem
Your booklet also seems to me to
be bit loose in its discussion, by
failing to analyze the profits concept
more thoroughly. Profits may be cal
culated on a basis of cost, selling
price, capital assets or invested CAPT
tai.
For instance, eleven leading air
plane manufacturers with large gov
contracts in the first half
of 1871 earned 7.5% on sales and 418o
on invested capital. We need a good
deal more discussion about what con-
stitutes a fair profit Even a go
profit on sales would have netted a
very excellent return on investment
Continued on Page Four)