Q: Sir, I am in the retail business for three years now. And in three-year’s time we transferred to three different locations. We have also been adding capital from the time we started the business until now. Some of the capital invested was borrowed capital.
When we started, we invested on stocks that were either very slow moving or not moving at all. Right now, I can say that we are in a better location. But our sales did not improve much considering we have already cut down our overhead expenses to P9,000. There were months wherein profit is just enough to cover our overhead expenses. Our beginning inventory when we started is around P500,000 and now it is down to P300,000. Will adding another capital be a good decision or we might as well close the business? And is it true that in the retail business bigger stock inventory means bigger profit?
A:If your product is highly fashionable or seasonal, then your sales will be driven mostly by your inventory mix. This could be the reason why your stocks hardly moved as time goes by because your product could be out of season already and you need to replace it with new ones.