The Meaning of Turnover

This is the value of total sales of an organization during an accounting period. The turnover of a business is another name for sale.

Rate of turnover: This is the number of times the value of average stock of a business is sold during the year. The rate of turnover varies from one product to another. Expensive goods have slow turnover rate while perishable goods have rapid rate.

Factors that can Affect Turnover

1. The goodwill and reputation of the seller
2. The types of goods
3. Advertisement and sales promotion
4. Nearness of the business to consumer
5. Reduction in prices
6. Increase in the quantity of goods sold
7. Constant availability of goods.

Working Capital Turnover

Working capital turnover is a measurement comparing the depletion of working capital used to fund operations and purchase inventory, which is then converted into sales revenue for the company. The working capital turnover ratio is used to analyze the relationship between the money that funds operations and the sales generated from these operations. For example, a company with current assets of $10 million and current liabilities of $9 million has $1 million in working capital, which may be used in fundamental analysis.

Working Capital = Current Assets − Current Liabilities

Read more below-

SS2 Commerce Third Term: Profit (cont’d)