The Seventh Key to Financial Success – Turnover Ratios
Profit is important, but cash pays the bills. If your inventory, or monies owed to you, grow significantly, you can be profitable, but cash poor.
A past bank customer of mine was profitable, but had a cash flow crisis. By calculating how frequently his inventory was turning over, we discovered his inventory growth had consumed his cash.
Monitoring the frequency of inventory, receivables and payables turnover is necessary to be a good steward.
The Seventh Key to Financial Success referenced in my book, “Unconventional Business” is managing turnover ratios. It’s critical for good stewardship and for your cash flow.
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