184 



to other operating ratios, many of which are based on 

 sales. The iniphed assumption is that the amount of 

 research is directly proportional to the volume of 

 business. The data available from the questionnaires 

 arc quite extensive but research expenditures are given 

 only indirectly in terms of total research personnel. 

 One can, however, assume a figure ($4,000) for the 

 cost per man-year, and thereby arrive at an approxi- 

 mate value for the ratio of research to sales. 



Another similar index is the ratio of research expendi- 

 tures to net income. This is perhaps the more signifi- 

 cant ratio for a management considering the organi- 

 zation of a research laboratory, since it relates the 

 proposed expense directly to the revenue available for 

 its support, until such time as it shall have proved itself 

 a justifiable operating charge. 



National Resources Planning Board 



The data^ have been presented in figure 55 as the 

 average number of research employees maintained by 

 various corporate units, distributed according to their 

 sales and to net income. 



The research expenditures, measured in man-years, 

 are directly proportional to both sales and net income 

 over a wide range. This has been tacitly assumed 

 before in the use of the ratios as an index figure for 

 research. It is a little surprising, however, to find the 

 relationships so close. 



n The data for sales and net income were derived from Ihe income accounU given In 

 Moody's Industrials (1939) and represent, in most cases, an average value for the 

 3-ycar period 1936-38. Sales represent net sales where these are given, otherwise 

 gross sales, or, in a few cases, operating revenues, where this seemed Justifiable. 

 Net income Is the income after taxes and beture dividends. Subsidiaries were treated 

 as in the case of tangible net worth. (S'ee footnote 19.) The research employment 

 represents the total research personnel figures for 1938. Commercial laboratories 

 ani trade associations have been excluded. 



THE AVERAGE RESEARCH STAFFS MAINTAINED BY CORPORATE 



UNITS OF VARIOUS SIZES 



1,000 



100 



o 



10 



^. -" 



lOOPOO IpOO.OOO 10,000,000 



DOLLARS 

 TANGIBLE NET WORTH OF INDIVIDUAL CORPORATE UNITS 



100,000,000 



1,000,000,000 



FiaoRB 53. — The Average Research Staffs Maintained liy Corporate Units of Various Sizes: 1940 



