To determine the real value of the franchise or franchises is a difficult matter and involves the whole question of the company's relations with the community which it serves and with the local lawmaking bodies. The first question which arises is whether the franchise is perpetual or for a definite time, and the second whether it is partial or exclusive. Franchises vary greatly in these respects. Sometimes a franchise, apparently partial, is practically exclusive, owing to the fact that all the available space in the streets is already occupied by the company's own tracks. If the franchises of a company are limited as to time, it is expedient, if not imperative, that the bonds should mature before the expiration of the franchises. If the company whose bonds are under examination satisfactorily passes this physical test--if it possesses real estate of considerable value, if the replacement value of the property is as great or nearly as great as the amount of the bonds, and if the franchises, while perhaps not perpetual or exclusive, are yet of longer duration than the bonds and render successful competition unlikely--the next step may then be taken; that is to say, an examination of the company's financial condition and earning capacity may be made. The amount of its gross earnings should be examined and the figures scrutinized for a number of years back to discover whether its earnings are increasing or decreasing. The position in which the company stands for obtaining new traffic must be noted, and some estimate must be made of the stability of its earning power. In this connection the relations of the company to the public are of great importance. It must be learned whether the company follows the policy of conciliating or ignoring public sentiment. The net earnings of the company must then be examined. This involves a criticism of operating expenses. The payments of the road must be analyzed to determine whether the proper amounts have been expended for renewal of track, replenishment of rolling stock, and other improvement sufficient to keep the property in good physical condition. This is the most intricate subject in the investigation of a street-railway property. Unless proper allowance be made for depreciation, in addition to the expenses of direct operation, it is only a question of time before the strongest company will become bankrupt. Deterioration of plant and equipment, which goes on constantly, can only be offset in two ways: one is out of earnings and the other is out of the security-holders--that is, by decreases in the market value of the securities. The first takes prosperity or courage; the second leads to bankruptcy. It is difficult to measure depreciation accurately, but a safe rule is to write off ten per cent of gross earnings each month for depreciation. In this way the charge for depreciation will be proportionate to the traffic, which provides automatic adjustment.