C. Balance, showing movement in floating debt or in assets.

This table may be regarded as the culmination of the plan that runs through the previous tables. Its aim is to show the total income for the year, the several sources from which that income is derived, and the manner in which it is used. From the figures presented one may determine the degree of success which has attended the year's operations, for, since total income is set over against total expenditure, the balance will show either an increase or a decrease in assets or an increase or decrease in floating debt.

Independently of a previous analysis of railway capital, earnings, and expenditures an exhibit of this sort would be of little significance, but coming as it does after such an analysis, so that the items here mentioned may be traced back to the service which occasions expenditure and gives rise to income, the facts it discloses are of great importance. For one thing they will tend to allay the suspicions of the public with regard to all corporations that are equitably managed.

This table also has a direct bearing on the vexed question of overcapitalization when that question is regarded not so much in retrospect as in view of future railway expansion. In Table III, which treats of earnings and income, by earnings is meant earnings from operation, and by income is meant income from previous investments; and in Table IV, which treats of expenditures, only those expenditures are considered which are contingent on the operation of property as it exists. But in this table-Table VI-the word income is extended to include all moneys derived from the sale of new securities or the disposal of lands or other property as well as moneys received from operation and investment; while on the side of expenditures is included all permanent improvements or betterments of any sort.

The meaning of permanent improvements is sufficiently clear, but possibly the word betterments may not be understood. As the word is here employed it is intended to include such items as reduction of the indebtedness, either funded or floating (whether this be done directly or by payments to a sinking fund), investment in securities of any sort, and increase of cash assets; indeed any financial transaction by which the standing of the corporation is in any way bettered. It appears, then, that the purpose of the table is to balance the extension of property against the extension of debt. Recurring now to the question in hand, it is well known that a fruitful source of overcapitalization is the custom of creating debt for the purchase of equipment and making no provision for the extinction of the debt at the time the equipment shall have been worn out. New stock must then be issued to purchase new equipment, while the old debt yet remains as an incumbrance on the property. If, now, statistical inquiry into railway matters can show the average life of various sorts of equipment, and if, by means of some such annual balance as that suggested by the sixth table in this report, a failure to make provision for deterioration of the movable property is disclosed, the mere publication of such a fact will do much towards closing this avenue of overcapitalization. In matters of this sort the American

statistician has much to learn from the statistician of Germany. Among the most interesting of the questions investigated by German railway statistics is the one that pertains to the rate of deterioration in railway equipment.

The thoughts expressed above are but two of the many that suggest themselves when considering the significance of this last table of the report. Others may be presented when the details of the table shall be given in the completed report.

Respectfully submitted."

DECEMBER 1, 1888.

HENRY C. ADAMS,
Statistician.

TABLE I.-Classification of railways and mileage