STUDIES IN SECURITIES On Actual On Increased Oper. Ratio 1926... £17.20 $13.12 73.8% 1925.... a 9.54 75.4 1924... 7.47 77.0 1923... 10.30 18.0 ok Based on six months increase of exactly $1,500,000 in net income, the calendar year 1927 results would equal $12.85 per share of the enlarged common stock issue, since interest on the 6% bonds will continue until the January 1 redemption while all the new stock will not be issued until the December 1 final payment. Some further trimming of expenses should be in store, particularly as Baltimore & Ohio freight is 45% in cheaply moved bituminous coal, and a 70% operating ratio would add about $4.50 to common share earnings. The restoration of common dividends late in 1923 after a lapse of four years was at 5% rate. This with the December 1926 quar- terly payment was increased to 6% and 14% extra paid to make a total 6% for the year. From 1906 to 1914 69% was regularly paid from earnings at considerably lower rate than now and on past policy is based a reasonable expectation of 7% dividends to some. Following the 1924 and 1925 refunding of $135,025,000 bonds in- cluding nearly $120,000,000 314s with $2,137,000 consequent in- crease of annual interest, the 1927 financing frees Baltimore & Ohio from consideration of any important maturity prior to $63,- 250,000 414s in 1933, and thereafter to 1941, excepting $19.- 030,000 miscellaneous amounts. Destiny is believed to involve a closer alliance with the 1,140-mile Reading Co. and its 53%-owned subsidiary 691-mile Central R. R. of New Jersey in combination providing an entry to New York tidewater having unequalled room for development. With new purchases during 1926, Baltimore & Ohio at December 31 held 437,100 shares of Reading preferred averaging 40.21 cost and 262,900 shares of common averaging 40.66, the aggregate $28,- 268,000 being $20,000,000 below market quotations. This repre- sents 25.01% of Reading Co. stock and with practically identical holdings by the friendly New York Central the basis for a closer relation is soundly laid. Incidentally, Baltimore & Ohio in its treasury has stock in the segregated Reading coal property of nearly JI2000000 market value the disposal of which before 1928 is ecreed. The genuine value of the $215,187,800 Baltimore & Ohio common Stock soon to be outstanding is to be measured not only by the $81,483,000 protection in accumulated surplus but also by the fact [291