APPENDIX 1

387

Case 1. (See footnote, page 336.) On referring to the results
for Group 3 in this analysis (Table IV), it is seen that this exception
 is probably due to the large constant tendency for net earnings
 ratios to decrease. (See discussion under Group 3, above.)
The natural tendency for gross earnings ratios in banks in this
group is to decrease, and it was shown that gross earnings ratios
must increase o.17 of a point in banks in which it alone is assumed
to determine net earnings ratios before the constant tendency
for net earnings ratios to decrease is counteracted. Hence, in
so far as the value —o.o1 results from such banks, its meaning
is that gross earnings ratios increased less than 0.17 of a point
on the average in those banks.

Case 2. (See footnote to page 339.) This exception is probably
 due to a strong constant tendency for net earnings ratios
to increase for banks with increasing or with decreasing total
expense ratios, as shown by the constant K;, = + 2.47 + 0.31.
(See discussion of regression tendencies, Group 4.)

Case 3. (See footnote to page 339.) This exceptionally large
difference is probably due to the combined strong tendencies
(a) for net earnings ratios of banks in Group 4 to increase, regardless
 of the direction of change in gross earnings ratios, and
(6) for net earnings ratios of banks in Group 3 to decrease regardless
 of direction of change in total expense ratios. That is,
it is measurable in terms of the combined constants K, (for
Group 4) == + 1.02 and K, (for Group 3) =- 1.32.

Case 4. (See footnote to page 340.) The fact that the net
change in this case is positive (+ 0.24) is probably due to the
large constant, K, = + 2.47. Even though total expense is assumed
 to be increasing, which has the effect of decreasing net
earnings, the increases are not large enough to predominate over
this large constant tendency for net earnings ratios to increase.
(See further discussion of Group 4, above.)

Case 5. (See footnote, page 340.) This positive 0.07 is evidently
 due to the strong tendency for the net earnings ratios
of banks in Group 2 to increase, regardless of the direction of
change in total expense ratios. The constant, K,, for this group
= 4 2.16. Even though total expense ratios are here assumed
to be increasing, which has the effect of decreasing net earnings,