HOW TO READ A RAILROAD REPORT 159 
sixty per cent, and the investor jumps at the as 
sumption that the bonds of the road whose ex 
penses are only fifty per cent of the gross receipts 
are much better to hold than those of the road 
where sixty per cent of the gross is being spent on 
operating expenses. This is often a great mistake 
as the operating ratio or the ratio which expenses 
bear to gross earnings has very little significance. 
All depends on how much the two roads spend 
respectively on maintenance. An increase in main 
tenance costs may serve to reduce the net cost of 
transportation. If the road operating for fifty per 
cent has a similar traffic and territory and is spend 
ing as much for maintenance, then such a road is 
being more efficiently operated, but otherwise not. 
One may readily realize that the road spending 
sixty per cent on operating expenses may be 
putting back into the property a much larger 
amount by renewing ties, changing to heavier rails, 
building stronger bridges, etc., than the first men 
tioned property and if so, it may be much better 
for the investor to hold securities in the road with 
an operating ratio of sixty per cent. 
If all the roads were located in the same territory, 
and had the same character of traffic, it would be 
possible to ascertain the proper percentage of the 
gross earnings required for maintenance; but this 
is now very difficult. All depends on the territory 
and the character of the traffic. Western and 
southern roads with gross earnings of from $6,000 
to $7,000 per mile should expend almost twenty- 
five per cent of the gross earnings for maintenance;