What is a return on turnover?
Financial conditions are a specific set of management tools that the company can use to assess its operations. The return on turnover may apply to a number of asset turnover ratios. These conditions provide information on how the company uses the assets owned to generate income or collect cash owed by customers. Examples of ratio in the return of turnover include formulas that include receivables or stock accounts. Other items may fall into this section, although these two groups are the most common measurements. Companies often sell goods to the account and provide customers for several days to pay for purchased goods or services. The accounting reviews financial information on the company's receivables. Information usually comes from the balance sheet, financial statements prepared at the end of the month. The return on turnover ratios include the turnover of the receivables and the average collection period. The ratio may use monthly or annual financial data. The result of the ratio of the pointIt is how many times the company has collected IT with the entire receivable balance in every period. A higher number is more advantageous because this usually suggests that the company is very effective in collecting money owed. Lower figures are the result of poor collection procedures or expanding loan companies to customers who cannot pay future accounts.
The average collection period of how many days it takes to collect receivables with open accounts. The accountants distribute 365 - the number of days a year - the result of the ratio of receivables turnover. This provides information on the number of days needed to collect receivables with open accounts. These two combined ratios provide the integration of the return of turnover specifically related to receivables.
return on the inventory of turnover ratios is similar to receivables. Dividing costs for goods sold by an average inventory creates a number for how many times the company sells through its inVenturies in a given period. Again, higher numbers are more advantageous because higher stock sales suggest more efficiency in generating sales and making cash. The sale of inventories can result in a claim and create a clear connection between these return on the turnover ratios.
The second ratio of stock turnover is divided by 365 by rendering turnover, similar to the average collection period. The result is how many days the company will turn an inventory in a certain period. Lower numbers indicate that sales of stocks take less days, often plus for the company. These two stock ratios together provide a good view of the company's accounting and management processes.