Regulation, Valuation and Depreciation of Public Utilities (Classic Reprint)

Excerpt from Regulation, Valuation and Depreciation of Public Utilities

The net income of a coporation for dividend purposes cannot be determined until all taxes, depreciation, maintenance and up-keep expenditures have been deducted, 'otherwise the dividend is not paid from the earnings, but by a depreciation of the capital account. To earn a dividend 'and be honest with itself, its stockholders, its creditors and the public it has to serve, a corporation cannot dis tribute earnings at the expense of capital. If a corporation, year after year, should distribute its earnings, after deducting expenses. Making no allowance for taxes, or the replacement, or up-keep re quirements of the plant, in time its-entire capital would be' gone by the payment of unearned dividends. (595)

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