“Company turnover” can refer to revenue, employee turnover, or asset rotation, depending on the context. High or low turnover can be desirable, and it can provide insight into a company’s overall health. It’s important to clarify the meaning and measures used to calculate turnover.
The term “company turnover” can have several different meanings, which can refer to revenue, asset utility, or employees, depending on the context. In all cases, the term involves the number of complete replacements within a given accounting cycle, whether of the company’s staff or the products on sale. Context can determine whether low or high turnover is more desirable, and companies can report key numbers in annual reports and other disclosures to investors and employees to provide insight into the overall health of the company.
In the sense of employee turnover, the term describes the number of times employees are replaced in a given period. In a company with 30 employees where 15 leave each quarter, turnover is high. On the other hand, if one employee leaves every five years, the company will have low turnover and overall longevity. This form of company turnover is generally viewed more favorably when it is low, because it suggests that the company is a pleasant place to work and that employees do not want to leave.
Some regions use this term to describe general recipes. High turnover of the company indicates a large volume of sales, while low turnover may imply that the company has difficulty moving products and services. An advantage of accounting from a turnover perspective is the ability to account for a business that sells at low volume but high value. Hearing that a company landed a sale for the year isn’t very impressive unless that sale looks like something like a very expensive cruise ship and the company actually has a very respectable turnover rate.
Another form of company turnover is asset rotation, in which accountants examine how efficiently the company uses assets. This is determined by dividing total income by the value of assets. High asset turnover shows that companies transfer assets quickly to make them profitable, while low turnover illustrates that the company keeps them. However, this is not necessarily a sign of economic troubles, as a company can focus on a period of investment and growth to improve revenues in the future.
In discussions about company turnover, it is important to find out what this term means, as it can be very variable. Sometimes this is evident from the context; in discussions about terms of employment, for example, people often mean employee turnover when discussing the turnover rate. If the meaning is not obvious, it may be advisable to ask for clarification. It can also help to find out what types of measures are being used to calculate turnover, as this can have an impact on the meaning of the data.
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