NET EARNINGS IN DISTRICT I 339

ter—the dots, of course, are all above the line; that is, in the area
of increasing net earnings ratios. It is of interest to observe,
however, that the dots tend to be distributed over a wider range
vertically than horizontally, this fact indicating that the increases
in net earnings ratios are generally more dependent upon changes
in the gross earnings ratios than upon those of total expense. A
similar distribution of the dots in the lower left-hand quarter
obtains. The banks here represented had decreasing ratios of
net earnings, inasmuch as gross earnings ratios were decreasing
and ratios of total expense were increasing. The alignment, however,
 shows that the fall is primarily to be attributed to the decreases
 in gross earnings ratios.
When gross earnings and total expense ratios are both increasing,
 the dots are predominantly to the right of the area of nochange
 in net earnings; that is, net earnings ratios tended to
increase, this condition being primarily due to the greater changes
in gross earnings. On the other hand, when both ratios are decreasing,
 a majority of the dots are to the left of the no-change
area of net earnings; that is, net earnings ratios tended to decrease,
 a condition brought about by relatively greater changes in
gross earnings than in total expense ratios.
If the net changes in net earnings ratios are determined when
changes in the ratios in one series are paired with the positions
in the other, relative to the 1924 average, the following results,
under conditions making for increases and for decreases, respectively,
 in net earnings ratios, are obtained.

ConDITIONS MAKING FOR INCREASES IN NET EARNINGS RATIOS

Ratios

Gross Earnings
Total Expense

Gross Earnings
Total Expense

Gross Earnings
Total Expense

Gross Earnings
Total Expense

Nature
of
Change

ncreasing
Decreasing

‘ncreasing
Decreasing

(ncreasing
Decreasing

Increasing
Decreasing,

Position

Above
A hove

ibove
Above

Below
Below

Below
Below

Ratios

Total Expense
(Gross Earnings

Total Expense
Gross Earnings

Total Expense
Gross Earnings
Total Expense
Gross Earnings

Position

Above
Above |

Below
Relow

Above
Above

Below |
Relow

Net Change
in Net
Farnings

26
4.10
+.27
+ +9*
+ .41t
+.20%

+.37
+.132

*4For exclanation of these signs and amounts. see Appendix I, page 387. Cases 2 and 3, respectively.