how much is that doggy in the window the cost of holding dead inventory
TRANSCRIPT
12/31ASSETS
Current Assets:Cash on hand $1,500.00Checking Account $17,500.00Savings Account $3,050.00Accounts Receivable $14,215.87Bank Card Receivable $1,340.34Inventory $275,654.23
Total Current Assets: $313,260.44
Investments:Cooperative Stock $23,125.46Cooperative Notes $12,597.47
Total Investments: $35,722.93
Long Term Assets:Property and Equipment:Fixtures and Equipment $126,245.11Building $325,465.88
Total Property and Equipment: $451,710.99
Accumulated Depreciation: $207,950.25
Total Net Property and Equipment: $117,515.63
Other Assets:Utility Deposits $1,700.00
Total Other Assets: $1,700.00
Total Assets: $468,199.00
LIABILITIES AND EQUITY
Current Liabilities:Accounts Payable $47,850.00Building mortage - current $24,000.00Note payable - current $45,000.00
Long Term Liabilites:Building mortgage $62,000.00Note payable $84,000.00
Total Liabilities: $262,850.00
Stockholders' EquityCapital Stock $65,000.00Retained Earnings $114,664.00Current Income $25,685.00
Total Stockholders' Equity $205,349.00
Total Liabilities and Equity $468,199.00www.profitsplus.org
Your balance sheet
Your assets and your liabilities
Contributed capital, current income, retained earnings
What is the interest rate of the liabilities? (Mortgage, loans from lending institutions or individuals)
How much does your business need to earn to repay that money?
www.profitsplus.org
What interest rate are you expecting for the money you invested in the business?
Have you thought about the rate (ROI) you are currently earning with your business?
Have you thought about what your inventory is doing for your business?
www.profitsplus.org
Not just that the inventory looks old and detracts from the image of your business
Dead inventory is killing your ROI
What can we do starting today, to greatly affect your return on investment?
Use the FREE Return on Investment calculator at profitsplus.org
www.profitsplus.org
We input:
Total sales
Percentage of credit sales
Cost of goods sold
Operating expenses
Tax rate percentage
Average inventory on hand
www.profitsplus.org
Average accounts receivable
Other current term assets (cash)
Long term assets
Current liabilities (<12 months)
Long term liabilities (>12 months)
www.profitsplus.org
Total sales: $875,000Percentage of credit sales: 12% Cost of goods sold: $460,000Operating expenses: $340,000Tax rate: 20%Average inventory on hand:
$250,000
www.profitsplus.org
Average accounts receivable: $19,500
Other current term assets: $7,000
Long term assets: $175,000
Current liabilities: $23,000
Long term liabilities: $125,000
www.profitsplus.org
Gross margin %: 47.43%
Operating expense %: 38.86%
Net profit %: 6.86%
Inventory turnover: 1.84
www.profitsplus.org
A/R collection days: 66.86
Return on assets: 13.29%
Financial leverage: 1.49
Return on investment: 19.77%
Are you pleased with these?
www.profitsplus.org
Total sales: $875,000
Percentage of credit sales: 12%
Cost of goods sold: $450,000 ($460,000)
Operating expenses: $320,000 ($340,000)
Tax rate: 20%
Average inventory on hand: $250,000
www.profitsplus.org
Average accounts receivable: $19,500
Other current term assets: $7,000
Long term assets: $175,000
Current liabilities: $23,000
Long term liabilities: $125,000
www.profitsplus.org
Gross margin %: 48.57% (47.43%)
Operating expense %: 36.57% (38.86%)
Net profit %: 9.60% (6.86%)
Inventory turnover: 1.80 (1.84)
www.profitsplus.org
A/R collection days: 66.86
Return on assets: 18.60% (13.29%)
Financial leverage: 1.49 (same)
Return on investment: 27.68% (19.77%)
Are you pleased with these?
www.profitsplus.org
While COGS and operating expenses can make a difference…
Inventory turning makes a bigger difference
www.profitsplus.org
With 15% of inventory being slow turning
That is $37,500 at cost
Sell it at cost and put that money in the checking account
www.profitsplus.org
Was 1.80
Same
Was $7000.
Put the $37,500 into additional inventory that moves and have the same 2.12 inventory turn
What will that get you?
www.profitsplus.org
Same
Same
Was 27.68%
Was 875,000
Was 84,000
Never have a close out corner
Never have a true close out sale
Bundle close out items with full margin items
Special price the close out item with the sticker dots and offer with multi-level purchases
www.profitsplus.org
Never fall in love with inventory
Never buy inventory because you like it; but it because a customer will want it and pay your price for it
Never let inventory celebrate a birthday with you
www.profitsplus.org
www.profitsplus.org
Insanity – Using the same technique to do a task over and over,
but expecting different results.
