484. Gross Earnings are all the moneys received from the regular business of the company. 485. Net Earnings are the moneys left after paying expenses, losses, and the interest upon the bonds, if there be any. 486. In the division of the net earnings, or the apportionment of dividends and assessments, the calculations are made by finding the rate per cent. which the sum to be distributed or assessed bears to the entire capital stock. Hence, 487. Dividends and assessments are a percentage computed upon the par value of the stock as the base. EXAMPLES FOR PRACTICE. 1. The Long Island Insurance Company declares a dividend of 6%; what does A receive, who owns 14 shares? OPERATION. $1400 x .06 = $84 ANALYSIS. According to 449, we multiply the base, $1400, by the rate, .06, and obtain the dividend, $84. 2. A canal company whose subscribed funds amount to $84000, requires an installment of $6300; what per cent. must the stockholders pay? OPERATION. $630084000 = .071 ANALYSIS. According to 450, we divide the installment, $6300, which is percentage, by the base, $84000, and obtain the rate, .077 %. 3. A man owns 56 shares of railroad stock, and the company has declared a dividend of 8 %; what does he receive? Ans. $448. 4. I own $15000 in a mutual insurance company; how many shares shall I possess after a dividend of 6 % has been declared, payable in stock? Ans. 159 shares. 5. The Pittsburgh Gas Company declares a dividend of 15 %; what will be received on 65 shares? 6. A received $600 from a 4 % dividend; how much stock did he own? Ans. $15000. 7. The paid-in capital of an insurance company is $536000. Its receipts for one year are $99280, and its losses and expenses are $56400; what rate of dividend can it declare? Ans. 8 %. 8. The net earnings of a western turnpike are $3616, and the amount of stock is $56000; if the company declare a dividend of 6 %, what surplus revenue will it have? Ans. $256. 9. The capital stock of the Boston and Lowell Railroad Co. is $1830000, and its debt is $450000. Its gross earnings for the year 1858 were $407399, and its expenses $217621. If the company paid expenses, and interest on its debt at 55 %, and reserved $78, what dividend would a stockholder receive who owned 30 shares? Ans. $270. 10. The charter of a new railroad company limits the stock to $800,000, of which 3 installments of 10 %, 25%, and 35 %, respectively, have been already paid in. The expenditures in the construction of the road have reached the sum of $540,000, and the estimated cost of completion is $400,000. If the company call in the final installment of its stock, and assess the stockholders for the remaining outlay, what will be the rate %? Ans. 17. 11. The Bank of New York, having $156753.19 to distribute to the stockholders, declares a dividend of 5 %; what is the amount of its capital? Ans. $2,985,775 nearly. 12. The passenger earnings of a western railroad in one year were $574375.25, the freight and mail earnings were $643672.36, the whole amount of disbursements were $651113.53, and the company was able to declare a dividend of 8 %; how much scrip had the company issued? Ans. $7086676. 13. Having received a stock dividend of 5 %, I find that I own 504 shares; how many shares had I at first? Ans. 480. 14. I received a 6 % dividend on Philadelphia City railroad stock, and invested the money in the same stock at 75 %. My stock had then increased to $16200; what was the amount of my dividend? Ans. $900. 15. A ferry company, whose stock is $28000, pays 5 % dividends semi-annually. The annual expenses of the ferry are $2950; what are the gross earnings? Ans. $5750. STOCK INVESTMENTS.* 488. The net earnings of a corporation are usually divided. among the stockholders, in semi-annual dividends. The income of capital stock is therefore fluctuating, being dependent upon the condition of business; while the income arising from bonds, whether of government or corporations, is fixed, being a certain rate per cent... annually, of the par value, or face of the bonds. 489. Federal or United States Securities are of two kinds: viz., Bonds and Notes. Bonds are of two kinds. First, Those which are payable at a fixed date, and are known and quoted in commercial transactions by the rate of interest they bear, thus, U. S. 6's, that is, United States Bonds bearing 6% interest. : Second, Those which are payable at a fixed date, but which may be paid at an earlier specified time, as the Government may elect. These are known and quoted in commercial transactions by a combination of the two dates, thus: U. S. 5-20's, or a combination of the rate of interest and the two dates, thus: U. S. 6's 5-20; that is, bonds bearing 6% interest, which are payable in twenty years, but may be paid in five years, if the Government so elect. When it is necessary, in any transaction, to distinguish from each other different issues which bear the same rate of interest, this is done by adding the year in which they become due, thus: U. S. 5's of '71; U. S. 5's of '74; U. S. 6's 5-20 of '84; U. S. 6's 5-20 of '85. Notes are of two kinds. First, Those payable on demand, without interest, known as United States Legal-tender Notes, or, in common language, “Green Backs.” * The following eight pages contain four pages of new matter, on U. S. Securities, Bonds, Treasury Notes, Gold Investments, &c., to meet a necessity which did not exist at the time this book was written. The pupil will find the Cases, Rules, and Operations of the previous editions essentially the same in this, with additional examples, and other matter, which may be used or omitted; so that the present may be used with the previous editions with little or no inconvenience. Second, Notes payable at a specified time, with interest, known as Treasury Notes. Of these, there are two kinds, - Six-per-cent. Compound-interest Notes, and Notes bearing 7% interest, the latter known and quoted in commercial transactions as 7.30's. The nomenclature here explained is the one used in commercial transactions, which involve similar securities of States or corporations. The interest on all bonds is payable in gold. The interest on notes is payable in Legal-tender Notes. When Bonds or Stocks are sold, à revenue stamp must be used equal in value to one cent on each $100, or fraction of $100, of their currency value. If sold by a broker, this is charged to the person for whom they are sold. The following are the principal United States Securities: — CASE I. 490. To find what income any investment will produce. 1. What income will be obtained by investing $6840 in stock bearing 6%, and purchased at 95 %? OPERATION. = $6840.95 $7200, stock purchased. $7200 X .06 = $432, annual income. ANALYSIS. We divide the investment, $6840, by the cost of $1, and obtain $7200, the stock which the investment will purchase, (452). And since the stock bears 6% interest, we have $7200 X .06 income obtained by the investment. Hence, = $432, the annual RULE. - Find how much stock the investment will purchase, and then compute the income at the given rate upon EXAMPLES FOR PRACTICE. the par value. 1. The trustees of a school invested $35374.80 in the U. S. 5% bonds as a teachers' fund, purchasing the stock at 102 if the salary of the Principal be $1000, what sum will be left to pay assistants? Ans. $725.60. 2. A young man, receiving a legacy of $48000, invested one half in 5% stock at 95%, and the other half in 6 % stock at 112 %, paying brokerage at %; what annual income did he secure from his legacy? Ans. $2530. 3. I have 32300 to invest, and can buy New York Central 6's at 85 %, or New York Central 7's at 95 %; how much more prof itable will the latter be than the former, per year? 4. A owns a farm which rents for $411.45 per annum. If he sell the same for $8229, and invest the proceeds in U. S. 5-20's of '84, at 105 %, paying% brokerage, will his yearly income be increased or diminished, and how much! Ans. Increased $56.55. 5. A sold $8700 of U. S. 5-20's of '84 at 104 %, paying for necessary revenue stamps, and invested the proceeds in U. S. 10-40's at 94 %, brokerage % both for selling and buying. Did he gain or lose by the exchange, and how much annually? Ans. $45.62—. |
