"Turn-over?"
"Yes, ye ought to tur-rn over your investment in goods three and a half times a year—that is, ye ought to sell out your $8,000.00 stock that number of times; and as ye plan to add aboot 50 per cent. for the pr-rofit, ye should sell aboot $42,000.00 worth of goods within the peeriod of a year."
"And I am selling only $22,000.00? Then you mean to say that I am selling only about half as much hardware as I ought to with my present stock?"
"That statement of yours is just aboot correct," said he with a nod.
"Wait a minute!" I cried excitedly. "You've made a mistake. I don't make 50 per cent. profit. I make only 33 1-3 per cent., all around!"
"Ye mean," he declared quietly, "that ye make only 33 1-3 per cent. on sales. To get that percentage ye hae to add 50 per cent. onto your cost. Your percentage of profit on sales is verra deefferent frae your percentage o' profit on cost. Bide a wee," said he, and he did some rapid figuring on a slip of paper. "This will perhaps make it clearer to ye," and he handed it to me.
I never realized, until he worked it out, just the difference between profit on cost and profit on sales. Here it is:
| 20% | added to cost = 16⅔% | profit on selling price | |
| 25% | added to cost = 20% | profit on selling price | |
| 30% | added to cost = 23+% | profit on selling price | |
| 33⅓% | added to cost = 25% | profit on selling price | |
| 40% | added to cost = 28+% | profit on selling price | |
| 50% | added to cost = 33⅓% | profit on selling price | |
| 60% | added to cost = 37+% | profit on selling price | |
| 75% | added to cost = 42+% | profit on selling price | |
| 80% | added to cost = 44+% | profit on selling price | |
| 90% | added to cost = 47+% | profit on selling price | |
| 1 | 00% | added to cost = 50% | profit on selling price |
I thought the whole thing over carefully, and it seemed to me that what I had to do was, first of all, to analyze my stock and see if there were any items in which I was too heavily stocked, and if so to reduce that stock as soon as possible, and then put the money realized in other goods that would turn over quickly. I could see that that would increase the entire stock turn-over, at the same time increasing total sales by substituting new, fast-turning, stock for the excess stock in the lines I then had, and this would mean reducing my percentage of expense.
The accountant had remarked that increasing the turn-over was the big secret of meeting rising costs, and I would see that he was right. My head was in a whirl with percentages, costs, selling prices, gross and net profits, turn-over, increased cost of goods, higher prices of labor and a lot of other things going through it like a merry-go-round.