turnover

Examples of turnover in the following topics:

• Using the Receivables Turnover Ratio

  • The receivables turnover ratio measures how efficiently a firm uses its assets.
  • The receivables turnover ratio, also called the debtor's turnover ratio, is an accounting measure used to measure how effective a company is in extending credit as well as collecting debts.
  • The receivables turnover ratio is an activity ratio, measuring how efficiently a firm uses its assets.
  • Sometimes the receivables turnover ratio is expressed as the "days' sales in receivables":

• Inventory Turnover Ratio

  • Inventory turnover is the measure of the number of times inventory is sold or used in a time period such as a year.
  • The equation forinventory turnover is the cost of goods sold (COGS) divided by the average inventory.
  • Inventory turnover is also known as inventory turns, stockturn, stock turns, turns, and stock turnover.
  • A low turnover rate may point to overstocking, obsolescence, or deficiencies in the product line or marketing effort.
  • In assessing inventory turnover, analysts also consider the type of industry.

• Asset Turnover Ratio

  • The asset turnover ratio is a measure of how well a business is using all of its assets to generate sales.
  • One ratio that analysts use to evaluate a company's strength is the asset turnover ratio.
  • $Asset\quad Turnover\quad =\frac { Net\quad Sales\quad Revenue }{ Average\quad Total\quad Assets }$
  • The asset turnover ratio is a measure of how well a business is using all of its assets to generate sales.
  • Generally, an analyst will compare a business's asset turnover ratio to the business's ratios from prior accounting periods or to the business's competitor's asset turnover ratio for the same period.

• Reducing Turnover

  • In a human resources context, turnover is the rate at which employees leave an organization.
  • Staff turnover can be optimal when a poorly performing employee decides to leave an organization, or dysfunctional when the high turnover rate increases the costs associated with recruitment and training of new employees, or if good employees consistently decide to leave .
  • Turnover is measured for individual companies and for their industry as a whole.
  • Preventing the turnover of employees is important in any business.
  • Turnover can be optimal when a poorly performing employee decides to leave an organization.

• Inventory Turnover Ratio

  • Inventory turnover is also known as inventory turns, stockturn, stock turns, turns, and stock turnover.
  • Average days to sell the inventory = 365 days / Inventory turnover ratio
  • Stock turnover also indicates the briskness of the business.
  • However, a car dealer will have a low turnover due to the item being a slow moving item.
  • Calculate inventory turnover and average days to sell inventory for a business

• Review Techniques

  • In a human resources context, turnover is the rate at which employees leave an organization.
  • Staff turnover can be optimal when a poorly performing employee decides to leave an organization, or dysfunctional when the high turnover rate increases the costs associated with recruitment and training of new employees, or if good employees consistently decide to leave .
  • Turnover is measured for individual companies and for their industry as a whole.
  • Preventing the turnover of employees is important in any business.
  • Turnover can be optimal when a poorly performing employee decides to leave an organization.

• Activity Ratios

  • For some business, inventory turnover is an incredibly important metric.
  • Inventory turnover must be rapid, as the goods being sold are perishable.
  • Fashion industries are similarly reliant on inventory turnover, as the seasonality of both fashion styles and climate create a strong necessity for careful activity management.
  • For other businesses, asset turnover is a central activity metric.

• Total Assets Turnover Ratio

  • Total asset turnover is a financial ratio that measures the efficiency of a company's use of its assets in generating sales revenue.
  • Companies with low profit margins tend to have high asset turnover, while those with high profit margins have low asset turnover.
  • Companies in the retail industry tend to have a very high turnover ratio due mainly to cut-throat and competitive pricing.
  • Total assets turnover = Net sales revenue / Average total assets
  • Asset turnover measures the efficiency of a company's use of its assets in generating sales revenue or sales income to the company.

• Fixed Assets Turnover Ratio

  • Fixed-asset turnover is the ratio of sales to value of fixed assets, indicating how well the business uses fixed assets to generate sales.
  • Fixed-asset turnover is the ratio of sales (on the profit and loss account) to the value of fixed assets (on the balance sheet).
  • Fixed asset turnover = Net sales / Average net fixed assets
  • Turn tables should help you remember turnover.
  • Fixed-asset turnover indicates how well the business is using its fixed assets to generate sales.

• The DuPont Equation

  • The DuPont equation is an expression which breaks return on equity down into three parts: profit margin, asset turnover, and leverage.
  • Asset Turnover = 1,000,000/5,000,000 = 20%.
  • Companies with low profit margins tend to have high asset turnover, while those with high profit margins tend to have low asset turnover.
  • In industries such as these, the measure of asset turnover is much more important.
  • In the DuPont equation, ROE is equal to profit margin multiplied by asset turnover multiplied by financial leverage.