Turnover Ratio Formula

Turnover ratio is usually is the ratio of the assets owned as well as loosed by a particular company over a specific time period. A ratio is basically relates two quantities and also determines how two quantities depends on each other.

High Turnover ratio relies that the company goods are sold very quickly while the low turn over ratio relies that the company goods are sold slowly. It usually determine the profit or loss over a specific period of time.


Formula Used to Calculate Turnover Ratio Formula

The turnover ratio for a set of products under a company is given as

Turnover ratio = `"cost of goods or products sold"/ "total number of goods or products in stock"`
Example Problems on Turnover Ratio:

The cost price of the sold products is 200,000 dollars. The opening stock is 5000 dollars while the closing stock is 7000 dollars. Calculate the desired turnover ratio.

Solution:

As we know that Turnover ratio= `"number of goods sold"/ "total number of goods in stock"`

Now the total number of goods is given by = `(10,000+30,000)/2`

=   20,000 dollars

So,  Turnover ratio will be  `200,000/ 20,000`

= 10 times

One dollar revert to 10 times in case of sales (Answer)

2.   One of the companies in US has the turnover 3,650,000 dollars  in 2008 and 3,756,000 dollars  in 2009 and the quantity of assets are 695,000 dollars in 2009 and  587,000 dollars in 2008. Calculate the desired turnover ratio.

Solution:

As we know that Turnover ratio =  ["number of goods sold"/ "total number of goods in stock"]

Now the total number of goods is given by= `( 695,000+587,000)/2`

=   641,000 dollars.

Turnover ratio= `3756000/641000`

= 5.85 times

3.    The cost of sold products by the company is  400,000 dollars. The opening stock is 60,000 dollars wheras closing stock is  80,000 dollars. Calculate the desired turnover ratio.

Solution:

As we know that Turnover ratio =  ["number of goods sold"/ "total number of goods in stock"]

Now the total number of goods is given by `(60,000+80,000)/2`

=   70,000 dollars.

Turnover ratio = `(400,000)/(70,000)`

=  5.71 times (Answer)

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Practice Problems:

The cost of sold products by a company is 700,000 dollars. The opening stock = 30,000 dollars whereas closing stock = 50,000 dollars.Calculate the desired turnover ratio..(ans: 17.5 times)
One of the companies in US has the turnover of 4, 55,000 dollars in 2008 and 4, 00,000 dollars in 2007 and the quantity of assets are 450,000 dollars in 2008 and 350,000 dollars in 2007. Calculate the desired turnover ratio..(ans: 1.13 times