Evening star., 1934-01-19
WARNED TO WATCH
WORKING CAPITAL
Retailers Told to Differen-
tiate Between Profit and
Inventory Gains.
EY JOHN A. CRONE.

Special DlSpatcn 10 me quar-
NEW YORK, January 19.-Warning
that 1.-The coming imitation will look very
much like merely business improve
ment." Linhart Stearns. investment
counselor, told delegates to the nation
al retail dry goods convention here
that retailers should watch working
capital and inventory profits, differenti-
ate between profits and inventory ap-
probation, and prepare for deprecia-
ton.
"All three of your working capital
items, cash. receivables, and inventory,
are vulnerable in periods of advancing
prices" he explained to the merchants.
so far as cash Is concerned, II prices
rise each dollar becomes less valuable.
"As regards your receivables, the
money that your customers owe you,
the longer they owe you, the greater
your risk. II the money you receive
when customers pay their accounts is
insufficient to enable you to repur-
chase the same kind and amount of
goods you originally sold, you have lost
some of your real working capital. AS
regards inventories, if you sell an article
at a price which, after paying all ex
penses, leaves not enough to enable you
to repurchase the same article, you also
have lost working capital
Declared Not Real Profits.
Inventory profits are not real profits,
because if prices are continually rising
such profits are necessary to replace
your inventories when and if they are
sold. Then, too, it is difficult to de-
termine what is profit and what IS
merely inventory appreciation. Even If
your business has rapid turnover and
even If you earned a respectable amount
Of dollars on each turnover, if at the
end of the year your working capital
has not increased sufficiently to allow
you to do the same amount of business
that you could have done with the
working capital available to you at the
beginning of the year, you have made
no profit at all but rather loss
Declaring that 1.-The excessive, arti-
fetal and unbridled prosperity of 1929
must never return to the best interests
of the nation are tc be served, Sidney
r. Baer, vice president of Stix, Baer &
Fuller Co., st. Louis, saw indications of
a cheering expansion of retail business
over the next few months.
If retail business during the last six
weeks can be used as a basis for eSti-
he said, the outlook is most promis-
ing All economic indices justify such
point of view for the months just
before US. do not believe there is any
immediate danger of a slump in COM
modify prices, for in addition to prob
able increased demand 1 think We
can assume that ultimately there will
be a devaluation Of the gold content of
the dollar, which will certainly prevent
further defation if it does not ma
terially increase prices
Urges Quality Basis.
This is the time to push quality mer-
chandise, John Hughes Of Denholm &
Mckay Co., Worcester, Mass, told the
convention
Many women" he said, have be-
come accustomed to buying Inequality
shoes, exclusive handbags, petit point
bags and better-grade apparel. for eX-
ample. because of the reasonable prices
at which they have been sold, and will
want to continue to have fine merchan-
disc because it brought such definite
satisfaction. There is a definite resist
ance to lower-grade merchandise.
believe. however, that all merchants will
agree that If prices should be advanced
so rapidly that the average customers
income is left trailing far behind the
situation as it appears today may be
changed"
Business is undergoing renaissance"
rather than revolution" according to
S. A. Weissenburger sales promotion
manager Of the Halle Bros, Cleveland
"One of the first principles of the
new deal to be translated into business
practice and taught generally through
out the department store is that people
are important" he said. They are
important on both sides of the counter.
Smart merchants always have realized
that People, not things, make money.
Train your sales forces. With the
shorter days and working hours here to
stay, We canrot afford to allow the
most important factor in business, the
human element, not to be carefully and
adequately taught"
(Copyripht lo34)