INVENTORY STOCK WHY IS STOCK SO IMPORTANT t

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INVENTORY (STOCK)

INVENTORY (STOCK)

WHY IS STOCK SO IMPORTANT? t t t It is the lifeblood of a

WHY IS STOCK SO IMPORTANT? t t t It is the lifeblood of a trading business. It is what a business buys to sell to make a profit. It is the stock (inventory) that provides the profit to a trading business. – Manage it well … and you are on the road to success. – Fail to manage – you are history!

Three Most Important things!! Management of: t Stock t Debtors t Creditors t How

Three Most Important things!! Management of: t Stock t Debtors t Creditors t How are these three related?

The Cycle Pay the Creditor Buy Stock from A Creditor Collect Cash From a

The Cycle Pay the Creditor Buy Stock from A Creditor Collect Cash From a Debtor Sell Stock To a Debtor

Buy Stock • Buy on Credit. • Be absolutely sure of the credit term.

Buy Stock • Buy on Credit. • Be absolutely sure of the credit term. • Buy stock that sells fast (high turnover) • Buy only enough – Not too much or too less.

Buy Stock • Selling stock on credit increases sales. • Make credit checks •

Buy Stock • Selling stock on credit increases sales. • Make credit checks • Follow credit terms strictly. • Follow up on defaulters. Sell Stock

Buy Stock • If Selling on Credit: • You must collect cash from debtors

Buy Stock • If Selling on Credit: • You must collect cash from debtors before you payment is due to the creditors. Collect Cash Sell Stock

Buy Stock • Pay Cash to the Creditor Pay Cash Gross Profit • Keep

Buy Stock • Pay Cash to the Creditor Pay Cash Gross Profit • Keep the profit Sell Stock Collect Cash

Buy Stock • Buy more Stock Pay Cash Gross Profit Sell Stock Collect Cash

Buy Stock • Buy more Stock Pay Cash Gross Profit Sell Stock Collect Cash

Controlling Inventory t List 10 items that would ensure the most effective return on

Controlling Inventory t List 10 items that would ensure the most effective return on inventory. – That is, what you must do to ensure the best use of the stock?

t t t t t Rotate Stock (old ones in front, new ones at

t t t t t Rotate Stock (old ones in front, new ones at back) Set Minimum and Maximum levels Remove slow moving lines. Monitor products for obsolescence Monitor selling prices Monitor seasonal products Buy cheap but quality products Security Storage and handling (wastage)

Stock Turnover Andrew and Clarence At any point in time there is one TV

Stock Turnover Andrew and Clarence At any point in time there is one TV in their store. (The average stock is one – valued $100) They buy another TV as soon as the current one is sold. They repeat the cycle through out the year.

Andrew t t t Sold 365 TV in 2002. How many times did he

Andrew t t t Sold 365 TV in 2002. How many times did he buy & sell in that year? What was his stock turnover in 2002? What was the average Stock in his business on any one day? What was the Cost of Sales for 2002. Calculate: COS Average Stock =

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