What does turnover mean

Turnover is an accounting term that indicates the speed and efficiency of a company's operations, particularly in generating cash from accounts receivable and selling inventory.Turnover in business refers to several key aspects:1. Accounts Receivable Turnover: It measures the speed at which a company collects cash from credit sales. The formula is credit sales divided by average accounts receivable.2. Inventory Turnover: This assesses how fast a company sells and replaces inventory, calculated as the cost of goods sold divided by average inventory.High turnover rates in accounts receivable and inventory indicate efficient business operations, as the company is quickly converting its assets into cash.Turnover is also used in investing to describe the percentage of a portfolio sold in a specific time period. In this context, high turnover can lead to increased commissions for brokers.Turnover is crucial for assessing a company's financial health and operational efficiency, making it a significant factor for investors and business analysts.