Stock turnover definition12/15/2023 In accounting, accounts receivable is an important metric. Read on to learn about the different variety of turnovers a business can have: Accounts receivable turnover This term has different but related meanings in other contexts, such as in accounting, investment fund management and human resources. The company's general business turnover is €400,000. To calculate a company's general business turnover, follow these steps:ĭecide the time period you wish to use for your calculation.ĭetermine your gross sales over that time.ĭeduct discounts, allowances and returns.įor example, if a company has gross sales of €500,000 in the last year, along with discounts of €50,000, allowances of €30,000 and returns of €20,000, you can calculate the business turnover or net sales as follows: €500,000 − (minus) €50,000 − (minus) €30,000 − (minus) €20,000 = €400,000. Related: What does a business analyst do (role and responsibility)? How to calculate business turnover Identify areas where you can increase profit Identify actions you can take to improve the business's commercial effectivenessĬreate accurate budgets, forecasts and financial reports Understanding these concepts helps you to do the following:Īnalyse and measure the company's overall business performance It's important to understand your company's turnover and how it relates to profit. net income (with definitions and examples) Why is business turnover important? Net profit: To calculate net profit, you further deduct interest, taxes, depreciation and amortisation costs from the operating profit. Operating profit: To calculate operating profit, you further subtract your administration costs from the gross profit. Gross profit: To calculate gross profit, you deduct the direct expenses associated with creating your product or service from the turnover. You can calculate different types of profit, depending on the type of cost you deduct from the turnover or net sales figure. Turnover appears at the top and shows top-line revenues, while profit appears at the end and shows bottom-line results. A company income statement usually includes both turnover and profit. It relates to earnings from sales before you subtract major costs, while profit measures earnings after you deduct those costs. Turnover and profit are different concepts. Net sales refer to the amount made by the business after you've deducted returns, discounts and other sales-related allowances. It's the amount of net sales a company generates over a period of time. It refers to a company's income from trading. General turnover is a useful, easy to understand metric that's widely used in business.
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