7% 7
- Ee
50% shrinkage in rubber values at least proved the worth ef budget =
control of inventory. Merchandising a widely varied list\o®goods, 3
ordered from an annual distribution of 40,000,000 large aRd small \ ® J
catalogues to over 8,000,000 customers paying cash in adva e
95 of 100 transactions, and turning over the inventory now some
seven times a year, the company is intrenched against ordinary
troubles.

STUDIES IN SECURITIES

Montgomery Ward & Co. common stock offers attractive return
with a well-protected $4 dividend, plus the promise of an extra
payment in a good year. It is an equity suitable for investment
holding.

National Biscuit Co.

Co-incident with splitting the stock seven-for-one in December,
1922, and tripling the common dividend disbursement, National
Biscuit Co. began reporting earnings double the steady rate shown
for twenty-four years. Net of $11,025,000 was reported for 1922
(in which year a 75% stock dividend was paid, par reduced from
$100 to $25, and the cash dividend rate increased from 7% to
129%) and this earning capacity was substantiated by a steadily
increasing net income to $14,674,000 in 1926.

The contrast with preceding years was extreme. From organization
 in 1898 (as a merger of going concerns) to 1910, the net
income as disclosed ranged narrowly between $3,292,000 in 1898
and $4,101,000 in 1907; and from 1911 to 1921 between $4,130,000
in 1915 and $5.677.000 in 1921.

Suddenness of the jump in 1922 probably is explicable not by unusual
 expansion of business (for National Biscuit has grown gradually
 and, incidentally, without borrowing a dollar) but by accounting
 income more clearly to reveal earning power. Ultraconservatism
 has always marked National Biscuit bookkeeping.
Besides charging extensive plant alteration direct to operating expense,
 the company liberally wrote off outlays for new construetion
 and property acquisition. Gross business is not reported regularly,
 but we know that in 1909 $42,700,000 sales were handled
with plant carried at $53,000,000, while in 1922 sales were at a
$97,000,000 annual rate with plant valued at only $62,000,000.

The company now operates 43 plants with close to 200 selling
branches or agencies so that 90% of the business is done by owned
equipment delivering to customers’ stores. Inventory turnover
averages two weeks and receivables represent only about a week’s
collection. Except for a newly developing output of bread and
[53]