EDUCBA

EDUCBA

MENUMENU
  • Free Tutorials
  • Free Courses
  • Certification Courses
  • 250+ Courses All in One Bundle
  • Login
Home Finance Finance Resources Finance Formula Turnover Ratio Formula
Secondary Sidebar
Finance Blog
  • Finance Formula
    • Skewness Formula
    • Fixed Asset Turnover Ratio Formula
    • Forecasting Formula
    • EBITDA Margin Formula
    • Accounting Ratio Formula
    • Deferred Annuity Formula
    • Capital Investment Formula
    • Ratio Analysis Formula
    • Loss Ratio Formula
    • Benefit-Cost Ratio Formula
    • Probability Distribution Formula
    • Cash Conversion Cycle Formula
    • Accrued Income
    • DCF Excel summary
    • Price to Earning Ratio Formula
    • Current Yield of Bond Formula
    • Earnings Per Share Formula
    • Manufacturing Overhead Formula
    • FCFF Formula
    • Predetermined Overhead Rate Formula
    • Times Interest Earned Ratio Formula
    • Bank Efficiency Ratio Formula
    • Capital Expenditure Formula
    • Expense Ratio Formula
    • WACC Formula
    • Activity Ratio Formula
    • Standard Error Formula
    • Forward Rate Formula
    • Gearing Formula
    • Prime Cost Formula
    • Productivity Formula
    • t-Test Formula
    • Risk Free Rate Formula
    • Tax Shield Formula
    • Sortino Ratio
    • Reserve Ratio Formula
    • Bond Formula
    • Annualized Rate of Return Formula
    • Conditional Probability Formula
    • Financing Formula
    • Future Value of an Annuity Formula
    • For Profit vs Non Profit
    • Deadweight Loss Formula
    • Inflation Formula
    • Amortized Loan Formula
    • Horizontal Analysis Formula
    • Marginal Utility Formula
    • Kurtosis Formula
    • Macaulay Duration Formula
    • Multiplier Formula
    • Modified Duration Formula
    • Operating Leverage Formula
    • Payout Ratio Formula
    • Statistics Formula
    • Sampling Error Formula
    • Trend Analysis Formula
    • Taylor Rule Formula
    • Put Call Parity Formula
    • Annual Return Formula
    • Discount Rate Formula
    • Cash Flow Formula
    • Dilution Formula
    • Attrition Formula
    • Operating Expense Formula
    • Interpolation Formula
    • Annuity Due Formula
    • Bond Yield Formula
    • Turnover Ratio Formula
    • Efficiency Formula
    • Revenue Per Employee
    • Regression Line Formula
    • Yield to Maturity
    • Pearson Correlation Coefficient Formula
    • Accounting Formula
    • Fiscal Deficit Formula
    • Tax Multiplier Formula
    • Efficiency Ratio Formula
    • Demand Elasticity Formula
    • Gross Margin Formula
    • Elasticity Formula
    • Marginal Benefit Formula
    • Depreciation Formula
    • Cost-Benefit Analysis Formula
    • Percentage Change Formula
    • Levered Beta Formula
    • Shares Outstanding Formula
    • Capital Gain Formula
    • Convexity Formula
    • Gross Income Formula
    • Net Exports Formula
    • Producer Surplus Formula
    • Accounting Rate of Return Formula
    • Net Cash Flow Formula
    • Labor Force Participation Rate Formula
    • Moving Average Formula
    • Net Worth Formula
    • Accounting Profit Formula
    • Disposable Income Formula
    • Discount Formula
    • Average Variable Cost Formula
    • Total Variable Cost Formula
    • Product Cost Formula
    • Marginal Product Formula
    • Break-Even Sales Formula
    • Return on Sales Formula
    • Cost of Goods Manufactured Formula
    • Average Fixed Cost Formula
    • Stock Turnover Ratio Formula
    • Operating Ratio Formula
    • Equity Ratio Formula
    • Net Present Value Formula
    • Aggregate Demand Formula
    • Volatility Formula
    • Marginal Product of Labor Formula
    • Z Test Statistics Formula
    • Standard Cost Formula
    • Velocity of Money Formula
    • Invested Capital Formula
    • Unlevered Beta Formula
    • Bank Reconciliation Formula
    • Portfolio Return Formula
    • Central Tendency Formula
    • Accumulated Depreciation Formula
    • Intrinsic Value Formula
    • Decile Formula
    • Vector Cross Product Formula
    • Effective Annual Rate Formula
    • CAGR Formula
    • Mode Formula
    • Arithmetic Mean Formula
    • Real GDP Formula
    • Gini Coefficient Formula
    • Expected Value Formula
    • Price Elasticity of Supply Formula
    • Net Operating Income Formula
    • Profit Percentage Formula
    • GDP Per Capita Formula
    • Altman Z Score
    • Quartile Deviation Formula
    • Return on Capital Employed Formula
    • Consumer Price Index Formula
    • Economic Profit Formula
    • Market Share Formula
    • Real Interest Rate Formula
    • Income Elasticity of Demand Formula
    • Income From Operations Formula
    • Indexation Formula
    • Sales Formula
    • Money Multiplier Formula
    • GDP Deflator Formula
    • Residual Income Formula
    • Effective Interest Rate Formula
    • Coupon Bond Formula
    • Current Account Formula
    • Total Cost Formula
    • Total Expense Ratio Formula
    • Net Sales Formula
    • Percentage Decrease Formula
    • Uncertainty Formula
    • Nominal GDP Formula
    • Effect Size Formula
    • Delta Formula
    • Cost of Sales Formula
    • Fixed Cost Formula
    • Unemployment Rate Formula
    • Present Value of Annuity Formula
    • Compounding Formula
    • Geometric Distribution Formula
    • National Income Formula
    • Accounts Receivables Turnover Formula
    • Integer Formula
    • Ending Inventory Formula
    • Owner's Equity Formula
    • Capacity Utilization Rate Formula
    • Interest Formula
    • Nominal Interest Rate Formula
    • Risk Premium Formula
    • Interest Coverage Ratio Formula
    • Gross Profit Margin Formula
    • Diluted EPS Formula
    • Return On Average Equity Formula
    • Return on Average Assets Formula
    • Working Capital Formula
    • Revenue Per Employee Ratio Formula
    • Capital Employed Formula
    • Rule of 72 Formula
    • Inventory Turnover Ratio Formula
    • Preferred Dividend Formula
    • Retention Ratio Formula
    • Present Value Factor Formula
    • Equity Multiplier Formula
    • Continuous Compounding Formula
    • Return on Assets (ROA) Formula
    • Portfolio Variance Formula
    • Weighted Average Formula
    • Net Working Capital Formula
    • Tax Equivalent Yield Formula
    • Poisson Distribution Formula
    • Current Ratio Formula
    • Debt Ratio Formula
    • Quick Ratio Formula
    • Payback Period Formula
    • Marginal Cost Formula
    • Debt to Income Ratio Formula
    • Book Value Per Share Formula
    • Asset Turnover Ratio Formula
    • Perpetuity Formula
    • Bid-Ask Spread Formula
    • Price to Book Value Formula
    • Capital Gains Yield Formula
    • Net Profit Margin Formula
    • DuPont Formula
    • Bond Pricing Formula
    • Binomial Distribution Formula
    • Sustainable Growth Rate Formula
    • Average Collection Period Formula
    • Net Income Formula
    • CAPM Formula
    • Cost of Goods Sold Formula
    • Economic Order Quantity (EOQ) Formula
    • Amortization Formula
    • Enterprise Value Formula
    • Beta Formula
    • Cost of Equity Formula
    • Rate of Return Formula
    • Revenue Formula
    • Markup Price Formula
    • Cash Flow from Operations Formula
    • Simple Interest Rate Formula
    • Consumer Surplus Formula
    • Asset to Sales Ratio Formula
    • Debt Service Coverage Ratio Formula
    • Capitalization Rate Formula
    • Cost of Debt Formula
    • Straight Line Depreciation Formula
    • Variable Costing Formula
    • Return on Invested Capital Formula
    • Profitability Index Formula
    • Expected Return Formula
    • Cost of Capital Formula
    • Price Index Formula
    • Average Total Cost Formula
    • Discount Factor Formula
    • Price Elasticity Formula
    • Profitability Ratios Formula
    • Financial Leverage Formula
    • Contribution Margin Formula
    • Time Value of Money Formula
    • Balance Sheet Formula
    • Opportunity Cost Formula
    • Current Assets Formula
    • Operating Cycle Formula
    • Operating Margin Formula
    • Bond Equivalent Yield Formula
    • Marginal Revenue Formula
    • Sales Revenue Formula
    • Net Debt Formula
    • Times Interest Earned Formula
    • Gordon Growth Model Formula
    • Required Rate of Return Formula
    • Break Even Analysis Formula
    • Inventory Formula
    • Marginal Propensity to Consume Formula
    • Debt to Asset Ratio Formula
    • Solvency Ratio Formula
    • Interest Expense Formula
    • Leverage Ratio Formula
    • Dividend Payout Ratio Formula
    • Operating Profit Margin Formula
    • PEG Ratio Formula
    • Net Interest Margin Formula
    • Return on Equity (ROE) Formula
    • Overhead Ratio Formula
    • Future Value Formula
    • Days in Inventory Formula
    • Market Capitalization Formula
    • Sharpe Ratio Formula
    • Cash Ratio Formula
    • Retained Earnings Formula
    • Average Rate of Return Formula
    • Current Liabilities Formula
    • Equity Value Formula
    • Relative Risk Reduction Formula
    • Capital Adequacy Ratio Formula
    • Debtor Days Formula
    • DPMO Formula
    • Average Formula
    • Exponential Growth Formula
    • Net Realizable Value Formula
    • Range Formula
    • Shareholders' Equity Formula
    • Sinking Fund Formula
    • Doubling Time Formula
    • Salvage Value Formula
    • Coupon Rate Formula
    • Simple Interest Formula
    • Correlation Formula
    • R - Squared Formula
    • MTBF Formula
    • Change in Net Working Capital Formula
    • Midrange Formula
    • Normal Distribution Formula
    • Mean Formula
    • Population Mean Formula
    • Median Formula
    • Central Limit Theorem Formula
    • Free Cash Flow Formula
    • Stockholder's Equity Formula
    • Acid-Test Ratio Formula
    • Percentile Rank Formula
    • Purchasing Power Parity Formula
    • Harmonic Mean Formula
    • Relative Standard Deviation Formula
    • T Distribution Formula
    • Normalization Formula
    • Operating Income Formula
    • Markup Percentage Formula
    • Relative Change Formula
    • Maturity Value Formula
    • Salary Formula
    • High Low Method
    • Income Statement Formula
    • Market to Book Ratio Formula
    • Dividends Per Share Formula
    • Daily Compound Interest Formula
    • Working Capital Turnover Ratio Formula
    • Weighted Mean Formula
    • Compounded Annual Growth Rate Formula
    • Regression Formula
    • Margin of Error Formula
    • Hypergeometric Distribution Formula
    • Standard Normal Distribution Formula
    • NOPAT Formula
    • Effective Tax Rate Formula
    • Degree of Operating Leverage Formula
    • Outliers Formula
    • Information Ratio Formula
    • Percent Error Formula
    • Hypothesis Testing Formula
    • Activity Based Costing Formula
    • Coverage Ratio Formula
    • Market Risk Premium Formula
    • Degree of Financial Leverage Formula
    • Absorption Costing Formula
    • Future Value of Annuity Due Formula
    • Internal Growth Rate Formula
    • F-Test Formula
    • Covariance Formula
    • Population Variance Formula
    • Coefficient of Determination Formula
    • Adjusted R Squared Formula
    • Compound Interest Formula
    • Gross Profit Formula
    • Accounting Equation Formula
    • Sample Size Formula
    • Sample Standard Deviation Formula
    • Quartile Formula
    • Variance Analysis Formula
    • Correlation Coefficient Formula
    • Z Score Formula
    • Variance Formula
    • Present Value Formula
    • Coefficient of Variation Formula
    • Net Asset Value Formula
    • Profit Margin Formula
    • Holding Period Return Formula
    • Capital Asset Pricing Model Formula
    • Present Value of Annuity Due Formula
    • Depreciation Expenses Formula
    • Annuity Formula
    • Taxable Income Formula
    • Profit Formula
    • Monthly Compound Interest Formula
    • Equity Formula
    • Return on Total Assets Formula
    • Alpha Formula
    • Debt to Equity Ratio Formula
    • EBITDA Formula
    • Accrued Interest Formula
    • Dividend Formula
    • Common Stock Formula
    • Mortgage Formula
    • Growth Rate Formula
    • Absolute Value Formula
  • Accounting fundamentals (700+)
  • Asset Management Tutorial (200+)
  • Banking (44+)
  • Corporate Finance Basics (373+)
  • Credit Research Fundamentals (6+)
  • Economics (88+)
  • Financial Modeling in Excel (17+)
  • Investment Banking Basics (140+)
  • Investment Banking Careers (29+)
  • Trading for dummies (69+)
  • valuation basics (27+)
  • Insurance Resources (14+)
  • Top Finance Books (7+)
Finance Blog Courses
  • Investment Banking Course
  • Investment Banking Online Course
  • Financial Modeling Certification

Turnover Ratio Formula

By Madhuri ThakurMadhuri Thakur

Turnover Ratio Formula

Turnover Ratio Formula (Table of Contents)

  • Formula
  • Examples

What is the Turnover Ratio Formula?

Turnover Ratios are a tool to analyze the performance of the management based on the revenue where it is divided against the different class of assets to ascertain how much of assets were utilized to generate the revenue for a given period. It can depict the efficiency of different assets, and accordingly, the revenue and assets change as per the requirements, for example, Inventory Turnover Ratio, Working Capital Turnover ratio, Accounts Receivable Turnover Ratio, Total Assets Turnover Ratio.

These are all financial ratios that enable insight into different aspects and measure performance on different benchmarks. Some of the key turnover ratios are as follows:

Formulas,

Start Your Free Investment Banking Course

Download Corporate Valuation, Investment Banking, Accounting, CFA Calculator & others

Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory.
Working Capital Turnover Ratio = Net Sales / Working Capital
Accounts Receivable Turnover Ratio = Credit Sales / Average Accounts Receivable
Total Assets Turnover Ratio = Net Sales / Average Total Assets

Example of Turnover Ratio Formula (With Excel Template)

Let’s take an example to understand the calculation of the Turnover Ratio in a better manner.

All in One Financial Analyst Bundle(250+ Courses, 40+ Projects)
Financial ModelingInvestment BankingUS GAAPCFA-Level 1 & 2
Equity ResearchM & A ModelingPrivate Equity ModelingForex Trading
Price
View Courses
250+ Online Courses | 40+ Projects | 1000+ Hours | Verifiable Certificates | Lifetime Access
4.9 (86,522 ratings)
You can download this Turnover Ratio Formula Excel Template here – Turnover Ratio Formula Excel Template

Turnover Ratio Formula – Example #1

Let us take an example to calculate the Inventory Turnover Ratio. The given values are Opening Inventory = $ 2,000, Purchases $ 16,000, Closing Inventory $ 6,000. What is the Inventory Turnover Ratio?

Inventory Turnover Ratio

Solution:

Cost of Goods Sold is calculated using the formula given below

Cost of Goods Sold = Opening Inventory + Purchases – Closing Inventory

Turnover Ration Formula-1.2

  • Cost of Goods Sold = 2,000+ 16,000 – 6,000
  • Cost of Goods Sold = $ 12,000

Average Inventory is calculated using the formula given below

Average Inventory = (Opening Inventory + Closing Inventory) / 2

Average Inventory

  • Average Inventory = (2,000 + 6,000) / 2
  • Average Inventory = $ 4,000

Inventory Turnover Ratio is calculated using the formula given below

Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory

Turnover Ration Formula-1.4

  • Inventory Turnover Ratio = 12,000 / 4,000
  • Inventory Turnover Ratio = 3 Times

It shows that the inventory turnover ratio is 3 times, and it should be compared to the previous year’s data as well as other players in the industry to get a better sense.

Turnover Ratio Formula – Example #2

Let us take another example of a company Mobility Inc. Whose revenue from operations or net sales for a period is $ 15,000, and its current assets and current liabilities for the period are $ 10,000 and $ 7,500, respectively. What is the Working Capital Turnover ratio of the company?

Example of A Company Mobility Inc.

Solution:

Working Capital is calculated using the formula given below

Working Capital = Current Assets – Current Liabilities

Working Capital

  • Working Capital = 10,000 – 7,500
  • Working Capital = $2,500

Working Capital Turnover Ratio is calculated using the formula given below.

Working Capital Turnover Ratio = Net Sales / Working Capital

Turnover Ration Formula-2.3

  • Working Capital Turnover Ratio = 15,000 / 2,500
  • Working Capital Turnover Ratio = 6 Times

Working Capital Turnover Ratio of six times shows that sales in 6 times that of employed assets of working capital should be compared to the previous year’s data as well as other players in the industry to get a better sense.

Turnover Ratio Formula – Example #3

Let us take another example of a company which is having net credit sales worth $ 60,000 during one financial year. At the beginning of the financial year, Accounts Receivables were $ 2,500, and at the end, accounts receivables were $ 3,500. What are the Accounts receivable turnover ratio of the company?

Example of A Company

Solution:

Average Accounts Receivables is calculated using the formula given below.

Average Accounts Receivables = Opening + Closing / 2

Average Accounts Receivablea

  • Average Accounts Receivables = 2,500 + 3,500 / 2
  • Average Accounts Receivables = $3,000

Accounts Receivable Turnover Ratio is calculated using the formula given below.

Accounts Receivable Turnover Ratio = Credit Sales / Average Accounts Receivables

Turnover Ration Formula-3.3

  • Accounts Receivable Turnover Ratio = 60,000/ 3,000
  • Accounts Receivable Turnover Ratio = 20 times

It shows that sales and, specifically, credit sales are 20 times the accounts receivable outstanding, which is a good turnover to have, but it should be compared to previous year’s data as well as other players in the industry to have a complete analysis.

Turnover Ratio Formula – Example #4

Let us take an example to calculate the Total Assets Turnover Ratio. The given values are Net Sales for the year = $ 15,000, Total assets at the beginning of the year = $ 11,500 and Total assets at the end of the year = $ 12,000. What is the Total Assets Turnover Ratio?

Total Assets Turnover Ratio

Solution:

Average Total Assets is calculated using the formula given below.

Average Total Assets = (Opening Total Assets + Closing Total Assets) / 2

Turnover Ration Formula-4.2

  • Average Total Assets = 11,500 + 12,000 / 2
  •  Average Total Assets = $ 11,750

Total Assets Turnover Ratio is calculated using the formula given below

Total Assets Turnover Ratio = Net Sales / Average Total Assets

Turnover Ration Formula-4.3

  • Total Assets Turnover Ratio = 15,000 / 11,750
  • Total Assets Turnover Ratio = 1.28 Times

Total assets turnover ratio of 1.28 times shows that net sales are above average total assets, which are always favorable to have, though it should be compared to previous year’s data as well as other players in the industry to have a complete analysis.

Explanation

The formula for Turnover Ratio can be calculated by using the following points:

Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory

Cost of Goods Sold is the total cost of the goods sold during the period under consideration. Average Inventory is the amount of inventory maintained during the year; on average; it is arrived at by dividing opening inventory plus closing inventory by two.

Working Capital Turnover Ratio = Net Sales / Working Capital.

Net sales are the sales amount less any sales return or any discount offered (it may be a cash discount or bulk purchase discount). Subtracting Current Assets calculate working Capital with Current Liabilities; it shows the amount which is invested in the entity throughout the year in liquid assets.

Accounts Receivable Turnover Ratio = Credit Sales / Average Accounts Receivable

Credit Sales are the sales made on credit, i.e. without receiving the full amount for it immediately. Average Accounts Receivable is the average outstanding amount that is still not realized from the receivables; it is calculated by taking into account both opening and closing figures and dividing it by two. (Weighted average can also be considered)

Total Assets Turnover Ratio = Net Sales / Average Total Assets

Average Total Assets is the average of total assets held by the company throughout the period under consideration is calculated by taking into account both opening and closing figures and dividing it by two.

Relevance and Use of Turnover Ratio Formula

  • Inventory Turnover Ratio is used to calculate how much of the inventory is converted into cash, and the higher the ratio, the better it is; however, slow and non-moving items in the inventory should be considered as well before making any conclusions.
  • Working Capital Turnover ratio is used to showcase the ability to utilize the working capital. It is a great measure of comparison between the industry firms, past as well as the present.
  • Accounts Receivable Turnover Ratio indicates the ability to covert or collect its account receivables as it uses only credit sales in its formula instead of total sales. Its comparison with past data can help give insight into the quality of accounts receivable is held on the books.
  • Total Assets Turnover Ratio is the financial ratio that indicates all the assets combined to gather the sales for that specified period.

Recommended Articles

This is a guide to Turnover Ratio Formula. Here we discuss how to calculate the Turnover Ratio Formula along with practical examples. We also provide a Turnover Ratio calculator with a downloadable excel template. You may also look at the following articles to learn more –

  1. Example of Capital Gain Formula
  2. Working Capital Turnover Ratio(Advantages)
  3. How to Calculate Inventory Formula?
  4. Calculation of Total Expense Ratio
  5. List of Financial Ratios | Types | Advantages
Popular Course in this category
Investment Banking Course (123 Courses, 25+ Projects)
  123 Online Courses |  25 Hands-on Projects |   600+ Hours |  Verifiable Certificate of Completion
4.9
Price

View Course

Related Courses

Financial Modeling Course (7 Courses, 14 Projects)4.9
2 Shares
Share
Tweet
Share
Primary Sidebar
Footer
About Us
  • Blog
  • Who is EDUCBA?
  • Sign Up
  • Live Classes
  • Corporate Training
  • Certificate from Top Institutions
  • Contact Us
  • Verifiable Certificate
  • Reviews
  • Terms and Conditions
  • Privacy Policy
  •  
Apps
  • iPhone & iPad
  • Android
Resources
  • Free Courses
  • Investment Banking Jobs Offer
  • Finance Formula
  • All Tutorials
Certification Courses
  • All Courses
  • Financial Analyst All in One Bundle
  • Investment Banking Training
  • Financial Modeling Course
  • Equity Research Course
  • Private Equity Training Course
  • Business Valuation Course
  • Mergers and Acquisitions Course

ISO 10004:2018 & ISO 9001:2015 Certified

© 2022 - EDUCBA. ALL RIGHTS RESERVED. THE CERTIFICATION NAMES ARE THE TRADEMARKS OF THEIR RESPECTIVE OWNERS.

EDUCBA
Free Financial Modeling Course

3 Statement Model Creation, Revenue Forecasting, Supporting Schedule Building, & others

*Please provide your correct email id. Login details for this Free course will be emailed to you

By signing up, you agree to our Terms of Use and Privacy Policy.

EDUCBA Login

Forgot Password?

By signing up, you agree to our Terms of Use and Privacy Policy.

EDUCBA
Free Investment Banking Course

Corporate Valuation, Investment Banking, Accounting, CFA Calculator & others

*Please provide your correct email id. Login details for this Free course will be emailed to you

By signing up, you agree to our Terms of Use and Privacy Policy.

EDUCBA

*Please provide your correct email id. Login details for this Free course will be emailed to you

By signing up, you agree to our Terms of Use and Privacy Policy.

Let’s Get Started

By signing up, you agree to our Terms of Use and Privacy Policy.

EDUCBA

Download Turnover Ratio Formula Excel Template

EDUCBA

डाउनलोड Turnover Ratio Formula Excel Template

This website or its third-party tools use cookies, which are necessary to its functioning and required to achieve the purposes illustrated in the cookie policy. By closing this banner, scrolling this page, clicking a link or continuing to browse otherwise, you agree to our Privacy Policy

Loading . . .
Quiz
Question:

Answer:

Quiz Result
Total QuestionsCorrect AnswersWrong AnswersPercentage

Explore 1000+ varieties of Mock tests View more