Posted in Operations and Supply Chain Terms, Total Reads: 1000
Frequency or the rate at which the ( inventory , credit , employees ) in a business are getting replaced or replenished .It gives a fair indication if the item is being static and how efficiently the space is being utilized .
It gives a complete picture of the balance sheet and shows effectively the firm is utilizing its current assets which cannot be made out by merely looking at its magnitude only. A higher value of turnover is usually preferable but not always Turnover of a company is the annual revenue generated from its business and non business activities. Example
Inventory Turnover - It gives a measure of annual sales to the average inventory maintained in the stock . It means the inventory is being churned efficiently without delaying the complete business cycle. It is a measure of labor being productive .
Employee Turnover – A higher value of employee turnover ratio means the firm has a low retention rate . This is however not always preferred since additional cost has to be spent in hiring and recruitment . The costs involved in training and developing the new employee and time which he takes to get adept at his work.