Month: February 2015

Flipping Houses – Proper Inventory Turnover Rate

Turnover Rate with Flipping Houses

In your typical business operation, turning the inventory over as often as possible has several benefits.  First, it generally reduces overall costs, secondly, it generates greater profits and third, by increasing the profitability, the company has a greater return on equity.  OK, this seems all well and good, but does turning the inventory over in...

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House Flipping – Business Dynamics

There is a lot of misinformation about flipping real estate on the internet and on television.  I’m mostly shocked by the lack of detailed information related to the entire cost of the project and the adjusted sales price.  I have yet to read a single article that goes into the details of the business dynamics...

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Types of Business Models

In business there are four distinct business models.  Just about any business can be identified with one of the four.  The following are the four types of business models: Low-Volume, Hi-Margin Hi-Volume, Hi-Margin Low-Volume, Low-Margin Hi-Volume, Low-Margin  No single model is the best or the worse.  Each works in their respective industries.  In general, the …

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Basis for Tax Purposes

Basis is a term used in computing gains and losses on the disposition of an asset.  For any business owner or individual taxpayer it is important to understand what the Internal Revenue Service (IRS) is really seeking.  What is your tax basis in an asset?  So in a simple transaction such as purchasing stock, assume...

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Pizza Restaurant Audit Guide used by the Internal Revenue Service

In the mid 90’s, the Internal Revenue Service created an audit guide specifically for pizza establishments.  Today, this guide along with the Retail Industry Guide, specifically Chapter 4 which covers the examination techniques for the food service industry is used to audit the typical family style pizza restaurant.  If you own a pizza restaurant, this...

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Skimming in Business

Skimming is a generic term referring to taking a little bit off the top.   In dairy, it refers to the cream at the top of the milk pail.  In painting, it refers to a very thin coat of paint to identify imperfections with the wallboard.  In business, it means taking a little bit of the …

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Nondeductible Expenses in Small Business

One of the more significant expenses for the small business owners is income taxes.  Since most small businesses are tax pass through entities, it is beneficial to the business to have the least amount of net income in order to reduce the tax obligations of the owner(s).  This is achieved by making sure every dollar...

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Direct Form of Compensation – Four Different Types

There are four different types of direct compensation for employees.  These include: 1) Hourly Compensation, 2) Salaries, 3) Commissions and 4) Bonuses.  There is some misinformation related to direct compensation as this subject relates to owners of a small business.  Items such as distributions or dividends or some assigned values on the K-1 are generally...

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Marginal Revenue in Business

The scholarly definition and reality are two different perspectives.  The student is taught that marginal revenue equals the additional dollars generated for an additional single unit of sales.  It is literally taken right down to the micro measurement.  This is simple to understand but in small business, the scope of its meaning and impact are...

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Elasticity in Economics

One of the terms synonymous with the field of economics is ‘Elasticity’.  The term refers to the change in either the demand or supply (the other terms synonymous with economics) curve when there is a change in the price.  In general, if the price increases a little for consumer goods and the consumers decrease their …

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