NET EARNINGS IN DISTRICT 1 327
Gross earnings ratios vary;!® they are positively correlated with
ratios of total expense,!” and are indifferently correlated with
ratios of net earnings.!®
Ratios of total expense vary;!? they are positively correlated
with ratios of gross earnings,?? and are negatively correlated with
ratios of net earnings.?!
Ratios of net earnings vary; 22 they are positively correlated with
ratios of gross earnings,?® and are negatively correlated with
ratios of total expense.?*
Knowing these relations to obtain, let us determine the aver-
age levels of net earnings ratios in 1924, in 1925, and in the two
years combined for the Boston district member banks classified
by their positions, in the matter of both gross earnings and of
total expense, relative to their average levels. These amounts,
given in Table 191, bear out the generalizations just presented
respecting the relations of gross earnings and of total expense
ratios to those of net earnings. Moreover, they indicate in each
year that (1) net earnings ratios are higher when both gross
earnings and total expense ratios are relatively low than when
they are relatively high; (2) they are highest when ratios of gross
earnings are relatively high and those of total expense low; and
(3) they are lowest when relations inverse to those just presented
for gross earnings and for total expense ratios obtain.
While in general it is true, as shown in Table 191, that net
earnings ratios tend to be high when gross earnings ratios are
high and when total expense ratios are low, and that they tend
to be low when inverse conditions obtain, it is also true generally,
as shown by the same table, that low ratios of net earnings ac-
company high ratios of gross earnings when ratios of total expense
are also high, and, conversely, that high ratios of net earnings
are found with low ratios of gross earnings when low ratios of
total expense accompany them. Accordingly, it is necessary,
16 See Table 156.
17 See Table 159, and Chart 49.
18 See Table 189, and Chart 49.
19 See Table 163.
20 See Table 159 and Chart 49.
21 See Table 190 and Chart 49.
?2 See Table 186.
28 See Table 160 and Chart 49.
*% See Table 183 and Chart 49.
