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From Profit Mystery To Profit Mastery: Hidden Costs = Profits Lost

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Executive Summary

It would be unusual to see a profit and loss statement with an expense category called "Hidden costs," but any company that carries inventory or accounts receivable should know that these costs exist - and that their existence directly erodes the bottom line, the profits. Also known as carrying costs, they represent expenses related directly to carrying inventory or accounts receivable. These costs will exist if the business has either inventory or A/R - there's nothing one can do about that, except to know they're there and account for them in the pricing structure. It's when one carry too much inventory or when the A/R gets stretched out too far that one is incurring real expenses over which one can exercise control. That's called management.

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