FREE 10+ Turnover Ratio Analysis Samples and Templates in PDF

Turnover ratio is a financial metric that measures the efficiency of a company monthly management report in utilizing its stocks and assets purchase agreement. There are several types of turnover ratios, including inventory turnover, receivables turnover, and fixed asset turnover. A higher turnover ratio indicates better asset utilization and may suggest better financial projections, while a lower ratio may indicate inefficiency or an overinvestment in assets. However, it is important to analyze turnover ratios in the context of the industry value chain analysis  and the company’s specific circumstances, as some industries naturally have lower ratios due to their business model.

How To Make Turnover Ratio Analysis?

It is important to note that a high turnover ratio does not always indicate better financial performance. For example, a high fixed asset turnover in the retail sales industry agreement may indicate that the company is not investing enough in its physical stores, which may negatively impact customer experience and overall performance in the long run. On the other hand, some industries naturally have lower turnover ratios due to their business model, such as real estate property lease agreement samples or utilities. In these cases, it is important to compare the company’s turnover ratio to the industry average. To make a turnover ratio analysis, follow these steps:

Step 1- Determine the Type

There are several types of turnover ratios, including inventory turnover, receivables turnover, and fixed asset turnover. Choose the ratio that is relevant to your analysis.

Step 2- Gather Financial Data

To calculate the turnover ratio, you need to gather the relevant financial data, such as the cost of goods sold, accounts receivable, or fixed assets. This information can be found in a company’s financial statements, such as the balance sheet and income statement.

Step 3- Calculate the Ratio

The calculation of turnover ratios involves dividing the cost of goods sold or the revenue by a specific asset value. For example, to calculate inventory turnover, divide the cost of goods sold by the average inventory value.

Step 4- Analyze the Results

Once you have calculated the turnover ratio, analyze the results and compare it to the industry average or the company’s historical data. A high turnover ratio is generally desirable, but it is important to consider the specific circumstances of the industry and company when interpreting the results.