It is a type of financial ratio used to measure the efficiency of business in generating profit by utilizing assets The larger the turnover ratio, the better as it shows that the company is optimally utilizing its assets as resources to earn revenue Turnover ratios are calculated by dividing the revenues from average asset balance It is also termed as efficiency ratio because it shows the company’s efficiency in conversion of assets into sales which in turn reflects the ROI Inventory Turnover ratio measures how efficiently the stocks are being converted into finished goods to generate sales It is calculated as – Inventory Turnover Ratio = (Cost of Goods Sold)/(Average Inventory) Debtors Turnover Ratio signifies the efficiency of business in converting its debtors or credit sales into cash It is calculated as – Debtors Turnover Ratio = (Net Credit Sales or Revenue)/(Average Trade Receivables) Fixed assets turnover ratio measures how efficiently a company uses its fixed assets to generate revenue Fixed Assets Turnover Ratio = (Revenue from sales)/(Average Fixed Assets) Total assets turnover ratio takes into account both fixed as well as current asset to measure the overall efficiency in generation of revenue with assets utilization It is calculated as – Total Assets Turnover Ratio = (Revenue from sales)/(Average Total Assets) Working capital ratio measures the company’s efficiency in using its working capital to generate revenue for the business It also indicates the relation between liquidity and profitability of the business It is calculated as – Working Capital Turnover Ratio = (Revenue from sales)/(Average Working Capital) Thank you for Watching Subscribe to DevTech Finance

1. TURNOVER RATIOS
RATIO - ANALYSIS
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2. INTRODUCTION
● Turnover ratios measures the company’s efficiency in employing its assets to
generate revenue
● The larger the turnover ratio, the better as it shows that the company is
optimally utilizing its assets as resources to earn revenue
● Turnover ratios are calculated by dividing the revenues from average asset
balance
● It is also termed as efficiency ratio because it shows the company’s efficiency
in conversion of assets into sales which in turn reflects the ROI
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3. 1. Inventory Turnover Ratio
2. Debtors Turnover Ratio
3. Fixed Assets Turnover Ratio
4. Total Assets Turnover Ratio
5. Working Capital Turnover Ratio DevTech Finance

4. Inventory
Turnover
Ratio
Types of Turnover Ratios
● Inventory Turnover ratio measures how
efficiently the stocks are being converted into
finished goods to generate sales
● It is calculated as –
Inventory Turnover Ratio =
Cost of Goods Sold
Average Inventory
● Example-
COGS = 80000 , Opening Inventory = 10000,
Closing Inventory = 15,000
● Avg. Inventory = (Opn + Cls) / 2
= (10,000+15,000)/2
= 12,500
● ITR =
80000
12500
= 6.4
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5. Debtors’
Turnover
Ratio
Types of Turnover Ratios
● It signifies the efficiency of business in converting its
debtors or credit sales into cash
● It is calculated as –
Debtors Turnover Ratio =
Net Credit Sales or Revenue
Average Trade Receivables
● Example-
Net Credit Sales = 10,000
Opening balance of trade receivables = 1000
Closing balance of trade receivables = 500
● DTR =
10000
(1000+500)/2
= 13.33
● Higher the ratio, the better is company in managing
its credit sales
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6. Fixed Assets
Turnover
Ratio
Types of Turnover Ratios
● Fixed assets turnover ratio measures how
efficiently a company uses its fixed assets to
generate revenue
● Fixed assets involves huge capital invested in it
which makes it crucial to be optimally utilized
for longer time
● It can be calculated as –
Fixed Assets Turnover Ratio =
Revenue from sales
Average Fixed Assets
● Example –
Revenue = 100,000
Opening bal. of Fixed assets = 50,000
Closing bal. of Fixed assets = 45,000
● FATR =
100000
(50000+45000)/2
= 2.10
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7. Total Asset
Turnover
Ratio
Types of Turnover Ratios
● Total assets turnover ratio takes into account
both fixed as well as current asset to measure
the overall efficiency in generation of revenue
with assets utilization
● It is calculated as –
Total Assets Turnover Ratio =
Revenue from sales
Average Total Assets
● Example -
Revenue = 100000
Opening bal. of Total Assets = 60000
Closing bal. of Total Assets = 50000
● TATR =
100000
(60000+50000)/2
= 1.81
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8. Working Capital
Turnover
Ratio
Types of Turnover Ratios
● Working capital ratio measures the company’s
efficiency in using its working capital to generate
revenue for the business
● It also indicates the relation between liquidity and
profitability of the business
● It is calculated as –
Working Capital Turnover Ratio =
Revenue from sales
Average Working Capital
● Example –
Revenue from Sales = 100000
Opening bal. of Working Capital = 50000
Closing bal. of Working Capital = 40000
● WCTR =
100000
(50000+40000)/2
= 2.22
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9. Thank You For Watching