Turnover ratios are considered a subtype of efficiency ratios that, along with capacity and activity ones, are covered by the umbrella term of control ratios. In brief, efficiency ratios reflect the proportion between time devoted to certain work and its results. Turnover ratios, in particular, show the efficiency of utilizing company assets for extracting earnings from them. This variable is normally presented in a form of a relation between the amount of an asset and a revenue. A higher ratio indicates the minimal use of funds invested and a higher ROI, which means an optimal application of company resources (Borad, 2021). Turnover ratios can be categorized depending on what exactly they measure, for instance, capital employed, total asset, fixed asset, and other.
Analyzing turnover ratios is essential to both external and internal parties of the business. They enable the internal members, for instance, the board of directors, to see the efficiency of the current management strategy and decide whether it needs updating or not. The external parties interested in checking turnover ratios are primarily investors, who they let estimate the efficiency of a particular business, hence the relevance of investing in it.
David Rainwater actually presents the same information in his discussion board post, but in a slightly less straightforward and more fragmentary way. Thus, he provides some unnecessary detail and sometimes repeats himself, more precisely, tells the same in different words. This complicates the description, making it more difficult to perceive and memorize. By contrast, he also gives more consideration to certain aspects of considerable importance, such as the process of calculating turnover ratios. Overall, his summary is in-depth and professional, notwithstanding the nominal lack of readability.
Reference
Borad, S. B. (2021). Turnover ratios. Finance Management. Web.