In the business there is an often use of the term turn-over, the use of the term has its different meanings at different places, the term used by a cost accountant has its separate meaning and the use of the term by the head of the business such as Board of Director has it separate meaning.
Let’s understand the usage of the term turn-over from different aspects:
In the accounting the term turn-over has its literal meaning that it is used to measure or calculation of how quickly the business is collecting its receivable from those who have purchased products or services rendered to them on account.
While when the business heads (Board of Directors) use the term turn-over they are talking about the profit or the sale of the company’s product for a particular period of time.
A company usually maintain its turn-over on the yearly basis, generally it is asked by the shareholder or by the partners or contributors of the company that what is the current turn-over of the company.
Sometimes people become confused what exactly they are talking about as we have discussed earlier that the term has its separate meaning for the separate persons and occasions.
There are some other meaning of the turn-over as well that turn-over is a an amount of money that a company use to allocate or taken by the company for a particular period of time, and the turn-over for the manager typically for the lower or middle level manager is that when he or she uses the term turn-over it meaning he or she is talking about the rate at which company is making downsizing or sometimes the rate of hiring and firing of workforce.
There is a use of different formula to measure the turn-over, the other turn-over is that is used for the inventory which meaning that the company is making sale of the product multiple times in a particular time the number of sales in that particular period or the use of the inventory in a particular time period is known as turn-over in the inventory turn-over.
Inventory turn-over is calculated as the division of cost of goods sold is divided with the average of the inventory or sometimes the net sales are divided with the average inventory by adopting such formals company can easily calculate their turn-over ratio.
There some other formula for the measurement of turn-over but these formulas are different and are calculate as according to the usage of particular term.