Vv

NORMS, TRENDS, AND CORRELATIONS IN GROSS
EARNINGS RATIOS

I. INTRODUCTION

Tis chapter relates to the norms, trends, and correlations in
ratios of gross earnings to earning assets, for all of the member
banks in the Boston Federal Reserve district for the years 1924
and 1925. Unfortunately, data are available to us for only these
years, but limited as they are in point of time, they nevertheless
 seem to be significant. In what way, it is the purpose of
this chapter to develop.

2. NORMS AND TRENDS IN GROSS EARNINGS RATIOS

The average ratios of gross earnings to earning assets for 410
member banks in the Boston district in 1924 and 1925 were,
respectively, 6.04 and 6.17.! When the banks are classified by
the sizes of the cities in which they are located, as in Table 155,
‘he amounts range from 5.83 to 6.28, the ratios being generally
lowest for the banks in the largest cities. Moreover, as shown
in this table, there is some evidence of a functional relationship
between the size of the city of location and the size of the ratios.
The same may also be said concerning the ratios for the banks
classified according to volume of earning assets.
But the amounts in Table 155 are averages from which there
are variations each year for banks in different city-size and
volume (earning assets) groups, and in the same city-size and
volume groups for different years. Table 156, which, according
to two methods of classification, shows the distribution of the
ratios for the combined years, indicates the range over which
they extend and the points at which they cluster. With such
1 These averages, being derived from the ratios themselves, differ from those for
Boston as shown in Table go, the latter being weighted figures.

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