Question

Describe in 2 sentences what turnover ratio measures

Answer 1

Answer:

Turnover ratio measures the efficiency of company that how campmay is utilise there assets for generating revenue (Sales)

Turnover ratio measures how much assets ( individual asset or total aseets ) are used for generating revenue (Sales)

High Turnover ratio considered as better.

Types of Turnover ratio:

1. Fixed Asset turnover ratio

2. Debtors turnover ratio

3. Inventory turnover ratio

4. Average collection turnover ratio

Example:

Suppose XYZ Inc. Has following data:

Sales is $ 5,00,000

Fixed Asset is $ 10,00,000

Asset Turnover Ratio = Sales / Fixed Assets

= $ 5,00,000 / $ 10,00,000

= $ 2

That means, Every $ 1 investment in Fixed asset returns of $ 2 revenue.