Turnover

Posted in Operations and Supply Chain Terms, Total Reads: 1293
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Definition: Turnover

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.

Hence, this concludes the definition of Turnover along with its overview.

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