Accounting Turnover Rate Calculator
Calculate the efficiency of your business assets by determining how many times they "turn over" during a specific period.
Calculation Results
Turnover Ratio:
0.00
Average Days to Turn Over:
0 Days
How to Calculate Turnover Rate in Accounting
In accounting, the turnover rate measures how efficiently a company uses its assets to generate sales or how quickly it clears through inventory and receivables. A higher turnover rate generally indicates higher efficiency, though the "ideal" number varies significantly by industry.
The General Formula
Turnover Ratio = Net Activity (Sales or COGS) / Average Asset Balance
To find the Average Asset Balance, you add the value of the asset at the beginning of the period to the value at the end of the period and divide by two.
Types of Accounting Turnover Rates
- Accounts Receivable Turnover: Shows how many times a business collects its average accounts receivable balance. High ratios suggest efficient credit and collection processes.
- Inventory Turnover: Shows how many times a company has sold and replaced inventory during a specific period. This uses COGS instead of Net Sales.
- Total Asset Turnover: Measures the ability of a company to generate sales from its total assets.
Practical Example
Imagine a retail store has Net Sales of $1,000,000. At the start of the year, they had $80,000 in Accounts Receivable, and at the end, they had $120,000.
- Average Balance: ($80,000 + $120,000) / 2 = $100,000
- Turnover Ratio: $1,000,000 / $100,000 = 10
- Days to Collect: 365 / 10 = 36.5 days
This means the store clears its receivable balance 10 times per year, or roughly every 36.5 days.