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Definition of Turnover

Turnover, in business and finance, refers to the total value of goods or services sold or the total revenue generated by a company during a specific period.

It is a key financial metric that reflects the company's sales performance and its ability to convert inventory or services into revenue.

Turnover is essential for assessing the efficiency and productivity of a business and plays a crucial role in calculating various financial ratios and performance indicators.

What is Turnover?

Turnover represents the aggregate value of sales made by a business, considering both cash and credit transactions.

It is a fundamental indicator of a company's economic activity and its ability to generate income from its core operations.

Turnover is closely monitored by company management, investors, and analysts to gauge the company's growth, market share, and overall financial health.

A high turnover rate can indicate strong sales performance and efficient utilization of resources, while a low turnover rate may suggest potential issues with sales, inventory management, or customer demand.

What are examples of Turnover?

As an example:

A retail store records $500,000 in sales revenue during a fiscal year.

The total value of goods sold during that period, including all products and services, amounts to $400,000.

The turnover for this retail store would be calculated by dividing the total sales revenue ($500,000) by the cost of goods sold ($400,000), resulting in a turnover rate of 1.25.

This means that the store generated $1.25 in revenue for every $1 worth of goods sold.

A higher turnover rate indicates that the store is selling its inventory quickly and efficiently, generating revenue at a healthy pace.

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