Industrial bonds include the obligations of all manufacturing and mercantile companies, and miscellaneous companies of a private character. They form a class quite distinct from railroad bonds or public-utility bonds. I. _Safety of Principal and Interest._ The safety of industrial bonds, in common with the safety of all forms of investment, depends upon the margin of security in excess of the amount of the obligation. In the case of industrial bonds the amount of this margin is not always easy to determine. Even when determined, the rule is difficult of application because a margin which may seem insufficient from the point of view of physical valuation may be satisfactory when considered as the equity of a working concern. The indications most to be relied upon in estimating the safety of industrial bonds are as follows: (_a_) _Value of real estate._ The first point to be determined in considering the purchase of an industrial bond is the value of the real estate upon which it is a first mortgage. If the appraised value of the ground, irrespective of the buildings and machinery upon it, is greater by a substantial sum than the amount of the bond issue, the obligation is practically a real-estate mortgage. In such a case, while possibly "slow," _i.e._, secured by an assets difficult to realize upon--the safety of the bond can hardly be questioned. In judging a bond upon its real-estate value, it is not always safe to take the cost price of the land as shown by the company's books, because frequently the cost upon the books is artificially raised by payment having been made in securities whose market value is less than par, or in other ways. As stated above, judgment should be based upon the _appraised_ value of the land. If the bond meets this test satisfactorily, the prospective investor may feel reasonably sure that the safety of his principal is not in question, and may buy the bond without anxiety if it satisfies his other requirements. On the other hand, if the bond only partially meets this test, and it appears that some part of its value comes from plant and equipment and from the strength of the company as a working concern, then it is necessary for the investor to consider carefully several other factors.