Turnover
Turnover rate, also known as the "turnover ratio" or "turnover time," is an important financial measure that reflects a company's efficiency in managing its assets. It is an important concept in financial analysis and allows investors and managers to measure the effectiveness of the use of company assets. This measure provides insight into how often a company turns its assets into sales and profits in a given period.
What is turnover rate?
Turnover rate measures the rate at which inventories, accounts receivable and fixed assets are converted into cash. A high turnover rate indicates that a company is using its resources efficiently and may indicate good liquidity. In contrast, a low turnover rate may indicate inefficient inventory management, difficulty in collecting receivables or inefficient investment in fixed assets. It is important to understand that the ideal turnover rate can vary by industry. By analyzing this measure, companies can optimize their business processes and improve their financial performance.
