This session by Tom Shay illustrates the cost of a small business holding onto inventory that is not selling. By selling this inventory, even at cost or below, and putting that money into inventory that is selling will increase the gross sales, profitability, and return on investment.

1. www.profitsplus.org
Presented by Tom Shay of
Profits Plus Solutions
727-464-2182
tomshay@profitsplus.org

2. 12/31
ASSETS
Current Assets:
Cash on hand $1,500.00
Checking Account $17,500.00
Savings Account $3,050.00
Accounts Receivable $14,215.87
Bank Card Receivable $1,340.34
Inventory $275,654.23
Total Current Assets: $313,260.44
Investments:
Cooperative Stock $23,125.46
Cooperative Notes $12,597.47
Total Investments: $35,722.93
Long Term Assets:
Property and Equipment:
Fixtures and Equipment $126,245.11
Building $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 $47,850.00
Building mortage - current $24,000.00
Note payable - current $45,000.00
Long Term Liabilites:
Building mortgage $62,000.00
Note payable $84,000.00
Total Liabilities: $262,850.00
Stockholders' Equity
Capital Stock $65,000.00
Retained Earnings $114,664.00
Current Income $25,685.00
Total Stockholders' Equity $205,349.00
Total Liabilities and Equity $468,199.00www.profitsplus.org

3. 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?
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5. 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

7. We input:
Total sales
Percentage of credit sales
Cost of goods sold
Operating expenses
Tax rate percentage
Average inventory on hand
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8. Average accounts receivable
Other current term assets (cash)
Long term assets
Current liabilities (<12 months)
Long term liabilities (>12 months)
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9. Total sales: $875,000
Percentage of credit sales: 12%
Cost of goods sold: $460,000
Operating expenses: $340,000
Tax rate: 20%
Average inventory on hand:
$250,000
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10. 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
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11. Gross margin %: 47.43%
Operating expense %: 38.86%
Net profit %: 6.86%
Inventory turnover: 1.84
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12. 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?
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14. 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
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17. 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

19. While COGS and operating
expenses can make a difference…
Inventory turning makes a bigger
difference
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20. 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
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21. Was 1.80
Same
Was $7000.

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23. Same
Same
Was 27.68%
Was 875,000
Was 84,000

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Insanity – Using the
same technique to do
a task over and over,
but expecting
different results.

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