by the inclusion, almost without dissent, of a section in the Transportation Act of 1920 which gives to the Interstate Commerce Commission a power that had been suggested almost 50 years earlier by the Windom Committee and again a decade later by the Cullom Committee, but which had been refused or ignored through many years. GAINS OF SECURITY REGULATION For good or for ill, the regulation of railway security issues in the United States is now an accomplished fact and, it may be added, in the four years' administration of this portion of the Act, the decisions of the Interstate Commerce Commission have been so reasonable and constructive that both the railways and the public confess the fairness and the desirability of control. Whether voluntary or compulsory federal incorporation is destined to follow for the railways is a matter for future determination: the decision rests primarily, it would seem, upon the success of security control under the terms of the present law. Certainly intelligent regulation of railway security issues should benefit materially every party at interest. Through the reasonable protection of the investor a broader and steadier market for railway issues will develop and be maintained, and this, in turn, will aid the carrier to meet the needs of the shipping public more adequately and more quickly. Security regulation, coupled with the valuation of carrier properties which is now nearing completion, seems to offer nothing but clear gain. The only loser will be the wolf in sheep's clothingthe criminal who, wrapped about with a cloak of respectability and styling himself "financier," has robbed rich and poor impartially as he operated carefully within the law. References: BONBRIGHT, JAMES C. Railroad Capitalization. Columbia University, 1920. CLARK, WM. L. and MARSHALL, WM. L. Corporation Law. Keefe-Davidson Co., 1901. CLEVELAND, F. A. and POWELL, F. W. Railroad Finance. D. Appleton & Co., 1912. CLEVELAND, F. A. and PowELL, F. W. Railroad Promotion and Capitalization. Longmans, Green & Co., 1909. DAGGETT, STUART. Railroad Reorganization. Harvard University Press, 1908. DEWING, ARTHUR S. Financial Policy of Corporations. Ronald Press Co., 1919. INTERSTATE COMMERCE COMMISSION. Annual Reports; Reports; Valuation Reports: Texas Midland, and so forth. JOHNSON, E. R. and VAN METRE, T. W. Principles of Railroad Transportation, chap. viii. D. Appleton & Co., 1921. LOUGH, W. H. Corporation Finance. Ronald Press Co., 1917. VANDERBLUE, HOMER. Railroad Valuation. Houghton, Mifflin Co., 1917. WYMOND, MARK. Railroad Valuation and Rates. Wymond & Clarke, 1916. -Report of Industrial Commission, XIX, 397-419 (1902). -Report of Railroad Securities Commission to Congress (1911). Some particularly interesting material dealing with the regulation of railway security issues will be found in the records of certain state com missions Massachusetts, New York, Wisconsin, Texas, California, and Washington being noteworthy; also in the Interstate Commerce Commission Reports for the past four years. XXII RAILWAY REVENUES, EXPENSES, AND DIVIDENDS Sources of railway revenue. Variations as to source among individual roads. Non-operating income: nature, importance, and sources. Railway operating expenses. Variations in proportion of operating revenues expended. Deductions from gross income. Individual and territorial differences in deductions. Disposition of net income. Movement of total revenues and expenses. Distribution of the railway dollar. The operating ratio: importance usually given it and an evaluation. Interest on railway bonds. Dividends on stock. Market weakness of railway securities. Needed changes to effect credit rehabilitation. Recapitulation of financial results in 1922, Class I railways. THE financial importance of the railway business is evidenced by the enormous investment in plants devoted to public service. It is also shown by the large sums of money received and disbursed annually by those carriers. These sums were relatively great in years past, but they have increased in an almost phenomenal manner during the past decade, due both to a tremendous gain in traffic and to the sharp upward movement. of the general rate level since 1917. In the discussion of railway revenues and expenditures following, attention is first directed toward the sources and amounts of revenue, then to the channels through which outlays flow. Finally, are indicated the distribution of those sums remaining to the railway after operating costs have been met and the effect of that distribution upon the market position of railway securities. SOURCES OF RAILWAY REVENUE Railway revenues are derived primarily from carrier operations from the movement of traffic and from activities immediately incident thereto. The classification of operating revenues prescribed by the Interstate Commerce Commission for steam railways divides these operating revenues into four groups of which the first and most important is rail-line transportation revenue, which constitutes approximately 972% of the total operating revenue. The second grouping, which comprises all water-line transportation revenue accounts, is quite unimportant, yielding little more than 4%. From the third group, incidental operating revenue, is derived slightly less than 2% of gross operating revenue. Joint-facility operating revenue constitutes the fourth and a negligible group. A statement of operating revenues for Class I carriers for the years ending December 31, 1922 and 1917, also June 30, 1912, appears in Table 24 on the following page. REVENUE VARIATIONS AMONG INDIVIDUAL ROADS A consolidated revenue statement for Class I railways of the United States, such as that just given, fails, however, to reflect the sometimes wide variations in particular types of traffic which exist among different sections of the country and among individual roads. Among Eastern, Southern, and Western districts the proportion of the total operating revenue derived from freight varied but fractionally from the 1923 percentage of 73 for all Class I roads, and the same was true of the proportion which passenger revenue contributed to the total, 18% in 1923. Incidental revenues varied more widely in proportion than either of the two major services. The great differences are found among the more specialized areas and among the individual roads, the data in Table 25 indicating the wide variations in the proportion of freight and passenger revenues to total operating revenue for selected properties in 1923. NON-OPERATING INCOME In addition, however, to the large revenues received from operation, the railways of the United States have an im |