to the following
well-established formula.

First, he pays out of his total returns, or gross receipts, the ordinary
costs of doing business--materials, labor, repairs and the like. These
payments are known as running expenses or up-keep.

Second, after up-keep charges are paid he takes the remainder, called
gross income, and pays out of it the fixed charges--taxes, insurance,
interest and depreciation.

Third, the business man, having paid all of the necessary expenses of
doing business (the running expenses and the fixed charges), has left a
fund (net income) which, roughly speaking, is the profits of the
business. Out of this net income, dividends are paid, improvements and
extensions of the plant are provided for.

Fourth, the careful business man increases the stability of his
business by adding something to his surplus or undivided profits.

The operating statistics of the United Steel Corporation for 1918
illustrate the principle:

1. Gross Receipts $1,744,312,163
Manufacturing and Operating expenses
including ordinary repairs 1,178,032,665
---------------
2. Gross Earnings $ 566,279,498
Other income 40,474,823
---------------
$ 606,754,321

General Expense, (including commission
and selling expense, taxes, etc.) 337,077,986
Interest, depreciation, sinking fund, etc. 144,358,958
--------------
3. Net Income $ 125,317,377
Dividends 96,382,027
--------------
4. Surplus for the year $ 28,935,350
Total surplus 460,596,154

Like every carefully handled business, the Steel Corporation,--

1. Paid its running expenses,
2. Paid its fixed obligations,
3. Divided up its profits,
4. And kept a nest egg.

The effectiveness of such means of stabilizing property income is
illustrated by a compilation (published in the _Wall Street Journal_ for
August 7th, 1919) of the business of 104 American corporations between
December 31, 1914, and December 31, 1918. The inventorie