Dictionary of Accounting Terms: turnover ratio
turnover ratio
measure of a particular asset's activity (e.g., sales, cost of sales). The average asset balance for the period is used equal to the beginning balance plus the ending balance divided by 2. A turnover ratio is an activity ratio. By looking at the turnover of an asset in terms of generating revenue, the accountant can properly appraise a company's ability to manage assets efficiently. Examples are the turnover in fixed assets (sales/fixed assets), accounts receivable (sales/accounts receivable), and inventory (cost of sales/inventory).
