follow were submitted by a domestic manufacturer from actual records:

Cost of Axminster and chenille Axminster 9 by 12 rugs, April, 1920.

This exhibit is of especial interest in showing the wide range of labor cost in the manufacture of different kinds of carpeting. The labor item in chenille Axminster is more than five times that in Axminster. Chenille Axminster weaving involves a much higher percentage of labor than that of any other domestic product.

Reference to Table 2 (p. 90) discloses the fact that the percentage of labor cost is lowest in Axminster seamless rugs (15.32 per cent) and highest in chenille Axminster seamless (38.01 per cent), the figures varying but slightly from those in the manufacturer's exhibit, which shows 19 per cent and 39.5 per cent, respectively, in Axminster and chenille Axminster seamless rugs. On the basis of dollars there is even less variance between the actual (manufacturer's exhibit) and weighted average figures for labor in 1919. The specific figures here shown indicate the representative character of the averages used in Table 2.

SECTION 4. FINANCIAL.

BALANCE SHEETS.

Balance sheets furnished the commission for 1919 show total assets in the industry to be over $100,000,000, with company investments ranging from $150,000 to $22,000,000. These represent establishments ranging from those situated in lofts, where only weaving is done, to those which take materials in the crude form and develop them into the finest of domestic carpetings. It is inadvisable to publish details of assets and liabilities by company totals, but the investments per square yard of product are significant and are therefore presented in the following table.

TABLE 6.-Assets per square yard of product, 1915 and 1919.

From this table it will be seen that the assets per square yard of the companies reporting ranged in 1919 from $0.615 to $17.535 and in 1915 from $1.249 to $19.409; that is, from the mill located in a rented loft with old looms and carrying no inventory, to the one which · owns valuable real estate, buildings, and equipment. Assets for 1919 have generally increased over those for 1915, an increase ranging from 3.27 per cent to an abnormal 570 per cent.

The policy of writing off values for depreciation and obsolescence in times of prosperity doubtless caused fixed assets (land, buildings, equipment, etc.) to decline in most instances in the period 1915-1919. The decline ranged from 1.36 to 81.18 per cent. Six of the companies show increases in fixed assets; these increases may possibly be explained by the practice of turning increased earnings to plant expansion.

4

Current assets (inventories, cash, accounts and notes receivable, liberty bonds, etc.) for 1919, in all except two instances, show marked increases over a corresponding period for 1915. These increases occur in 15 of the 17 companies reporting and range in percentage from 3.97 to 125.90. This may be due to any or all of a number of causes, viz, recent periods of prosperity, increased cost of materials in inventories, actual increase in production and amount of material carried in inventory, need of more cash and extension of more credit, and unsettled raw material markets.

In considering the foregoing balance sheet figures, due weight must be given the facts that total assets per unit will vary almost from day to day, that production in practically all cases could be increased without increasing fixed assets, and therefore fixed asset investment would appear to be decreased. This would not hold true in current assets, because, in general, increased production would occasion increased inventories, possibly increased cash to run the business and increased credit to jobbers to carry stock. Furthermore, certain of the carpet manufacturers produce textiles other than wool floor coverings, i. e., curtains, table covers, grass and fiber or jute carpetings.

▲ One company shows the abnormal increase of 903.16 per cent.

The difference between costs and selling prices is of some significance and, together with balance sheet figures, furnishes evidence as to the condition of the wool floor-covering industry.

TABLE 7.-Differences between costs and selling prices, by kinds and forms of

carpetings.

I The costs here given are for the last 6 months of 1919, the selling prices are as of June, 1920.

Discrepancies between the figures for weighted average costs in the above table and those shown in Table 3, pages 91-95, are due to the omission of certain firms from the compilations in Table 7 because of the lack of complete information on which to base calculations. Sufficient data were not available to ascertain a weighted average cost and selling price for every kind of floor covering.

In drawing conclusions from this table it must be borne in mind that data from which these figures are tabulated are original; i. e., they have not been adjusted, but are the actual figures as furnished by manufacturers.

Apparently no kind or form of carpeting has the advantage over any other as regards returns per unit; e. g., roll goods show both the largest and the smallest return per unit, while neither of the other two forms shows any general trend.

Table 8, showing the actual percentage of difference between costs and selling prices per unit, by companies, should be read in connection with Table 7.

TABLE 8.-Differences between costs and selling price per unit of carpeting, by

companies.

On the whole, the difference between costs and selling prices varies from 21.02 per cent in velvets to 111.67 per cent in Axminsters. But it will be noted that there are 20 of the 29 companies for which it is over 60 per cent and for 22 of the 29 it is over 50 per cent. Velvets are usually produced in greater quantity, involve slightly less labor per unit, are cheaper goods, and sell faster than Axminsters, which require slightly more hand labor, and are more expensive and less widely used.

SURPLUS, UNDIVIDED PROFITS, AND RESERVES.

Profits may be disposed of as a direct cash distribution to stockholders or as an issue of stock dividends, or they may be kept in the business as a surplus, undivided profit, or reserve. It is possible that they may also be used to reduce liabilities through the purchase of outstanding bonds. The Tariff Commission did not ask for statements of income, nor has it required consecutive balance sheets over a period of years from which profits might be deduced. In the balance sheets submitted, however, there are items for surplus, undivided profits and reserves which represent division of earnings, and it is believed that comparisons of the total of these per square yard of product for 1915 with the total for 1919 will corroborate deductions from the figures in Tables 6, 7, and 8.

Table 9 shows the condition of surplus, undivided profits, and reserve accounts per square yard of product at the end of the fiscal years 1915 and 1919 for comparable companies, and notes increases or decreases over this period.

TABLE 9.-Surplus, undivided profits, and reserves, 1915 and 1919.

The total of surplus, undivided profits, and reserves for each company has been divided by its total square-yard production to determine the figure in column 3. While this table (column 4) shows a wide spread, ranging from a minus 53.74 to a plus 856.60, it should be noted that 9 of the 12 companies show increases from 24.87 to 242.65 per cent and one the abnormal increase of 856.60 per cent.

These figures clearly indicate that the industry has passed through a period (1915-1919) of prosperity."

While an increase in surplus, undivided profits, and reserves indicates that a profit has been made, a decrease in the total of these accounts does not prove that the business has lost money. An examination of the balance sheets of the two companies which show decreases leads to the conclusion either that capital stock was increased out of surplus, or that production increased over the period more rapidly than did surplus. A further possibility is that reserves may have been wiped out by replacement of equipment.

It is possible that the companies included could not have distributed surpluses as profits-it may have been necessary to put such funds into the business in order to care for expansion or secure the financial foundations of the organization. The surpluses shown in the table bespeak efficient management and a healthy condition of the business over the period of years considered.

• In fairness to the companies whose figures are shown, it should be pointed out that the 1915 figures are doubtless subnormal (compared to a pre-war normal), because of the drain of the preceding lean years, but not to the extent that the 1919 figures are abnormal (also compared to a pre-war normal) on account of war and post-war activity. No attempt is made to state what normal is at present.