What is a good turnover ratio?
It varies widely by industry. Retailers often have high turnover (2.0+), while heavy manufacturing might have lower turnover (0.5-1.0).
Calculator
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Analysis
Interpretation of the current calculator output
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How to Use
Step-by-step instructions
- 1Enter the Net Sales for the period
- 2Input the value of Operating Assets at the beginning of the period
- 3Input the value of Operating Assets at the end of the period
- 4Review the Turnover Ratio
Turnover Formula
Indicates the dollar amount of sales generated for every dollar invested in operating assets.
Operating Asset Turnover = Net Sales ÷ Average Operating AssetsVariables:
Net SalesTotal revenue minus returns and allowancesAvg Assets(Beginning Assets + Ending Assets) ÷ 2Example
Manufacturing Co.
Inputs:
Net Sales:$1,000,000
Beginning Assets:$800,000
Ending Assets:$900,000
Steps:
- 1.Average Assets = ($800,000 + $900,000) ÷ 2 = $850,000
- 2.Turnover = $1,000,000 ÷ $850,000 = 1.18
Result:
1.18 (Generates $1.18 sales per $1 asset)
Frequently Asked Questions
What are operating assets?
Assets used in day-to-day business operations, like cash, inventory, receivables, and equipment. It excludes investments and non-operating assets.
How can I improve this ratio?
Increase sales with the same asset base, or reduce inefficient assets (e.g., sell unused equipment, reduce excess inventory).