How to calculate turnover coefficients

Coefficients of turnover is a group of indicators of financial and economic activity of the enterprise which characterize its business activity, and both in the short-term period, and in the long term. They allow to estimate efficiency of use of resources of firm in the ratio with a volume of the received revenue.

The sponsor of placement P&G Articles on the subject "How to Calculate Turnover Coefficients" How to calculate net working capital How to find current assets How to analyse receivablesInstruction

1

Most often in the analysis of activity of the enterprise apply coefficient of turnover of assets which pays off as a ratio of volume of the revenue received during work of firm for a certain period (usually 1 year), to the size of cost of assets. This indicator allows to estimate, how many revenues were made by each unit of assets of the enterprise.

2

The coefficient of turnover of assets pays off also separately on fixed assets (capital productivity) and on the reverse. Low level of coefficient of turnover of fixed assets is an indicator of insignificant sales level or too high size of capital investments. The coefficient of turnover of current assets testifies to the speed of a turn of the means of production participating in one business cycle.

3

The coefficient of turnover of stocks is defined as a ratio of size of product cost to the average annual size of stocks. The this coefficient is higher, the production of goods by the enterprise and the less his need for working capital is more effective.

4

The coefficient of turnover of receivables is defined as the relation of revenue of firm and size of receivables. It shows, how effectively the enterprise collects funds for the put production from buyers. Decrease in this indicator can testify to growth of insolvent clients and emergence of overdue receivables.

5

The coefficient of turnover of accounts payable pays off similarly. He points to timeliness of calculation of firm with suppliers. Decrease in this coefficient says that the enterprise has problems by calculations with creditors. However decrease in this indicator can sometimes testify to more favorable conditions with suppliers, for example, possibility of the delayed payments.