CHAPTER X 
SELECTING RAILROAD STOCKS 
W E have considered the three main features 
of a railroad report: first, the amount 
required for fixed charges, second, the 
amount required for operating expenses, and third, 
that portion of operating expenses used for main 
tenance. So far as the bond buyer is concerned, 
these are practically the only items he need 
seriously consider. Before purchasing the stock 
of a railroad, however, there are other features 
which should be studied, the principal of which 
is the percentage of gross earnings available for 
dividends, or to go a step further, the -percentage 
earned on the stock. 
How the Expert Writes His Report 
When the stock of a railroad is being considered, 
it is generally assumed that the client would not 
consider said stock, unless the bonds are perfectly 
good. Therefore, if the relation of fixed charges 
to the net and gross earnings is satisfactory, an 
effort is then made only to ascertain first, the per 
cent of gross remaining for maintenance and divi 
dends after the payment of necessary operating 
expenses and fixed charges; and second, the amount 
remaining for dividends on the Preferred and 
Common stocks after the payment of all operat 
ing expenses including maintenance, together with 
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