turnover ratio

Definition

A measure of how quickly a company converts various assets (inventory, receivables, etc.) into sales or cash. High turnover is generally good, unless you're turning over employees, which is just expensive.

Example Usage

Our inventory turnover ratio of 2.0 means we're sitting on six months of stock, which is either strategic planning or terrible forecasting.

Origin

Business efficiency metrics developed in early 20th century scientific management movement

Fun Fact

Grocery stores have inventory turnover ratios of 15-20, while jewelry stores hover around 1-2, proving that selling bread is very different from selling diamonds.

Source: Operational efficiency metrics

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