f Turnover: Sales, or churn Rate for Assets Employees or Customers
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Turnover in Business: Four Meanings
Definitions, Calculations, Meaning Explained


Several financial metrics measure different kinds of turnover rates, or frequencies. Turnovers in this way measure investment performance and efficiency.

In business, turnover rates are measures of efficiency and performance.

What Are The Meanings of Turnover?

In business, the term Turnoverrefers to tfour similar but different concepts:

  1. Firstly, Sales Revenue Turnoveris another term for Revenue Earningsduring a period. A company may be said, for example, to have had a turnover (sales revenues) of $10M last year.
  2. Asset Turnoveris the number of times a firm replaces assets during a year. Companies measure Turnover in this sense with activity and efficiency metrics such as Inventory Turns or Accounts Receivable Turnover.
  3. Turnover may refer to Churn or Replacement Rate in a firm's employee population Turnover in this sense complements the concept of employee retention. For all but the smallest businesses, some level of employee churn is inevitable. For the employer, employee turnover can bring both benefits and costs.
  4. Turnover may refer to Churn or Turnover Rate in a firm's customer or subscriber base. Turnover in this sense complements the concept of customer retention. High customer churn turnover rates normally represent costly problems.

ABC contrasts with traditional costing (cost accounting), which sometimes assigns costs using somewhat arbitrary allocation percentages for overhead or the so-called indirect costs. As a result, ABC and traditional cost accounting can estimate cost of goods sold and gross margin very differently for individual products. Contradictory and uncertain cost estimates can be a problem when management needs to know exactly which products are profitable and which are selling at a loss.

Explaining Turnover in Context

This article further defines, explains, and illustrates Turnover in context with related terms and concpts including the following:

Gross Sales Revenues
Net Sales Revenues
Turnover Growth
Asset Turnover
Activity Efficiency Metrics
Average Turnover Period
Days Sales in Inventory
Days Inventory Ouststanding
Acc'ts Receivable Turnover
Fixed Asset Turnover
Total Asset Turnover
Sales Turnover Per Employee
Employee Replacement Rate
Rightsizing the Workforce
Employee Churn
Workforce Turnover
Employee Retention
Laid Off Employees
Redundant Employees
Downsizing Workforce
Job Shopping
Customer Churn Rate
Customer Turnover
Subscriber Lock-In
Customer Satisfaction
Customer Churn Rate



Related Topics


First Turnover Meaning: Activity and Efficiency
What Does Turnover Reveal About Revenue Earnings?

One meaning of the term turnover is simply as another name for Sales Revenues. In business, the term Sales also serves as a short form of Sales Revenues. In other words:

Sales Revenues = Sales = Turnover

Where is Turnover on the Income Statement?

Sales Revenue (Turnover) belongs to one component of the three elements that make up the Income Statement Equation:

Income = Total Revenues - Total Expenses

Turnover (Sales Revenues) are part of the firm's Total revenues for an accounting period. Exhibis 1 and 2, below, are example income statements, showing that in one year, Grande Corporation reported revenues from 3 sources: (1) Net Sales Revenues (turnover), (2) Financial Revenues, and (3) Revenues from extraordinary items. Business people understand that any reference to Grand Corporation turnoveris a reference only to Grande's revenues from its main line of business (it's Net Sales revenues).

Grande Corporation                                   Figures in $1,000's
Income Statement for the year ending 31 December 20YY   
Net Sales Revenues (Turnover)
Cost of goods sold
       Gross Profit

Operating Expenses
   Selling expenses
   General & Admin expenses
       Total Operating expenses
       Operating Profit Before Taxes


Financial rev / exp gain (expense)
  Income before tax & extraord items
       Less income tax on operations
       Income before extraordinary Items
Extraordinary items after tax
          Net Income (Profit)

Exhibit 1. The simple example Income Statement begins with Net Sales Revenues—another name for Revenue Turnover.

Note, incidentally, that Turnover (Sales Revenues) appear on Exhibit 1 simply as Net Sales Revenues, whereas the more detailed Income Statement in Exhibit 5 presents figures for both Gross sales revenues (Gross Turnover) and Net Sales Revenues (Net Turnover). It is the Net figure in all cases that enters Income statement calculations because the net figure represents revenues actually earned.

Firms in Private Industry are Expected to Grow Turnover

Most profit-making firms are expected to grow over time—growing sales revenue turnover, growing profits, and growing shareholder value. When an industry and its markets are growing, a firm that does not grow may be at risk of losing out to competition, losing customer confidence, and losing investor confidence.

Industry analysts, in fact, carefully track sales revenue growth metrics for public companies, from year to year. They compare Turnover growth to profit growth, profit growth, and equity growth across the same period. The purpose is primarily to forecast future financial performance, and future market growth.

Exhibit 2, for instance, shows the sales revenue turnover growth performance of Apple, across the years 2002 - 2017. The Exhibit 2 growth curves show that Apple was remarkably successful in growing market share and revenues during this period. These historical data serve potential investors, in addressing the question: "How will Apple perform in the next few years?"


Exhibit 2.Net Sales Revenues turnover figures for Apple for 2002-2017 (solid black line) plotted alongside mathematical exponential curve (solid green line). For the period 2003 - 2013, both curves grow at an average annual rate of 39.3% for ten years. For this period, the actual sales curve conforms closely to the exponential curve. For this period, therefore, The cumulative average growth rate (CAGR) represents year-to-year sales growth. Modeling and predicting sales growth for the years after 2013 present different challenges.

Second Turnover Meaning: Asset Turnover Rate
What Does Activity and Efficiency of Asset Usage?

Turnover rates of various kinds are viewed as measures of efficiency, or activity performance. This concep applies especially to certain categories of Balance Sheets assets, which are expected to expectected to earn returns that exceed their costs.

For example, merchandise inventories and manufacturing inventories are costly to acquire and exapensive to handle and store. Inventory goods should ultimately turn into sales revenues, but while sitting idle in storage, they bring Expenses and produce no returns. In most cases, the faster a firm turns îts inventory base into revenues, the more efficiently it is using inventories. The Inventory Turns metric measures the rate at which this occurs.

In the same way, other Turnover metrics appearing below measure the firm's ability to earn returns from other asset classes and other resources, efficiently.

Turnover Metric 1
Inventory Turnover Per Year / Inventory Turns

Inventories, like other assets, should work efficiently to produce returns—that is, bring sales revenues. Inventories sitting idle are not working efficiently and may not be justifying their presence on the Balance Sheet.ues. Inventory assets "work" by getting out of the inventory warehouse and turn into sales revenues.

The inventory turn rate is also viewed as a rough measure of inventory liquidity, that is, the ease with which the firm turns inventory into revenues. Inventories that are not turning into revenues are  nonproductive assets.

This metric measure Inventory turns by comparing total net sales from the Income statement to the value of inventory from the Balance Sheet. The Balance Sheet inventory figures of course represent inventories at  period-end. When used this way, the period-end inventory total is viewed as a stand in for the typical or average inventory total for the year, at least for the purpose of creating the Inventory Turns metric.

How Do You Calculate Inventory Turnover Rate?

The Inventory turns example uses these three data items from the example Balance Sheet and Income statements below:

  • Total inventories at period end (Balance Sheet): $5,986,000.
  • Cost of goods sold (Income Statement): $22,043,000.
  • Net Sales Revenues (Income Statement):  $32,983,000..

Note that analysts commonly use two different methods for calculating inventory and that the two methods can yield different Inventory Turns results.

Inventory Turns  (Method 1 using Net Sales) 
             = Net Sales Revenues / Total Inventories
             = $32,983,000 / $5,986,000
             = 5.5 Inventory Turns / year

Note that some analysts calculate Inventory Turns using Cost of goods sold (CGS), or Cost of Sales in place of Net Sales Revenues. Whereas Net Sales Revenues represent the market value of goods, Cost of Goods Sold for the period represents their actual cost to the company: 

Inventory Turns  (Method 2 using CGS) 
             = Cost of goods sold / Total inventories
             = $22,043,000 / $5,986,000
             = 3.7 turns / year

The second method using CGS will generally be lower or more conservative than Method 1 using Net Sales.

Note also, that some firms use "Average inventory value" in place of "Total Inventories." The latter represents the end of period Balance Sheet figure. When substantial seasonal fluctuations in inventories occur, however, the period average inventory value may be the more appropriate representation. 

Using Inventory Turnover / Inventory Turns Metrics

In most cases, a higher inventory turn rate is preferred over a lower inventory turn rate. Reasons for this preference include the following:

  • Inventory represents an investment by the company. While the investment sits in inventory, funds used to purchase inventory cannot serve other purposes.
  • Inventory may require expensive storage space and handling.
  • Some kinds of inventory lose value quickly: Food, plant, and animal products may be subject to spoilage. Technology products may become outdated and obsolete. Fashion products may have high value only for a short season. Maintaining a high inventory turn rate for products with a short "shelf life" is critical. 

On the other hand, inventory turn rates can be too high if lack of inventories interferes with the company's ability to maintain manufacturing or production schedules, provide warranty service, expand into new markets, or otherwise meet customer needs.

In conclusion:

  • To track efficiency changes for a specific company, analysts compare Inventory Turns from year to year..
  • Optimal inventory levels and optimal inventory turn rates represent a tradeoff between (1) inventory costs and (2) the negative business impacts of insufficient inventory.
  • The difference between "good" and "poor" inventory turn metrics varies widely from industry to industry, and even between healthy companies in the same industry. An optimal inventory turn rate for one company is not necessarily an optimal rate for another.
  •  Inventory turn rates that fall substantially below the industry average,  may signal a serious problem in production or sales.

Turnonver Metric 2
Average Turnover Period / Days Sales In Inventory / Days Inventory Outstanding DIO

The inventory Average Turnover Period (or Days Sales in Inventory or Days Inventory Outstanding DIO) metric carries the same information as the Inventory Turns metric (above). Whereas Inventory Turns is a rate, or frequency per period, the Average TurnoverPeriod metric express the same information as a number of days per inventory turn.

How is Days Sales in Inventory Calculated?

The days sales in inventory examples here use the following data, calculated in the section immediately above:

  • Inventory turns per year (based on Net Sales Revenues): 5.5
  • Inventory turns per year (based on Cost of goods sold):  3.7
  • Days per year: 365 (some analysts prefer 360)

Calculate Average Turnover Period by dividing the number of Inventory Turns per year into the number of days per year. For the same example data used above:

Average Turnover Period 
(Method 1, using Inventory turns based on Net sales revenues)
             = Days per year / Inventory turns per year
             = 365 / 5.5
             = 66.4 days

The section above shows that analysts use two different approaches to calculating Inventory Turns per year. Firstly, Inventory Turns can represent Net Sales Revenues divided by total inventories. The second approach uses Cost of goods sold divided by Total inventories (or Average inventory). With the latter approach, the Average Turnover Period is usually called Days Inventory Outstanding, or DIO.

Days inventory outstanding (DIO), or Average Turnover Period
(Method 2, using Inventory turns based on Cost of goods sold)
             = Days per year / Inventory turns per year
             = 365 / 3.7
             = 98.7 days

DIO, calculated this way is one of the three components of the liquidity metric, Cash conversion cycle (CCC), illustrated in the article Liquidity Metrics. The two other CCC components are other efficiency metrics, Days Sales Outstanding (DSO) and Days payable outstanding (DPO).

Using Average Turnover Period Days Sales in Inventory

This metric carries the same information as the Inventory Turns metric (above). Thus, the usage guidelines for Average Turnover are the same as the guidelines for Inventory Turns, above. A minor note of caution when comparing Average Turnover Period metrics: Be sure that all values in view use the same number of days per year. The metric sometimes uses a 365-day year and sometimes a 360 day year.

Turnover Metric 3
Accounts Receivable Turnover

The Accounts Receivable Turnover metric shows—not surprisingly—the rate at which the firms's accounts receivable turnover. Accounts receivable appear on the Balance Sheet as assets. Like other assets, those that take longer to turn over are considered less productive than those that turn over quickly. 

How Do You Calculate Accounts Receivable Turnover?

Accounts Receivable Turnover is simply the ratio of Net Sales Revenues (an Income statement entry) to Accounts Receivable (a Balance Sheet item). 

From the sample statements below, the data for the average turnover period metric are:

  • Net Sales Revenues (from the Income statement):  $32,983,000.
  • Net accounts receivable (from the Balance Sheet): $1,832,000.

Accounts Receivable Turnover
            = Net Sales Revenues / Net Accounts Receivable
            = $32,983,000 / $1,832,000
            = 18.0 Accounts Receivable Turns for the year

Using Accounts Receivable Turns Metrics

  • An Accounts Receivable Turns rate greater than 12 indicates that, on average, accounts receivable are collected in one month or less. This results applies to the example firm above, with an accounts receivable ratio of 18.0.  When the Accounts Receivable Turns rate is in accord with the firm's payment terms, collection performance seems healthy.
  • The Accounts Receivable Turnover metric reflects the firm's ability to enforce good credit and collection policies. Stated collection periods for receivables vary from industry to industry, ranging from about 10 to 45 days. An average receivables turnover period exceeds that exceeds the firm's payment policy may be a signal that the company is having to accept business from customers who are poor credit risks.
  • A low Accounts Receivable Turnover rate may also mean the firm is having to extend extraordinarily long payment terms in order to win business.

Turnover Metric 4
Fixed Asset Turnover

The Fixed Asset Turnover metric compares sales revenue earnings (Net Sales Revenues from the Income statement) to the value of the company's total fixed assets (also known as Property, Plant and  Equipment or, sometimes, Operating Assets), from the Balance Sheet.  It measures how well the company generates revenue from assets that are not as liquid as current assets.

How Do You Calculate Fixed Asset Turnover?

Data for calculating Fixed Asset Turnover appear in example financial statements below:

  • Net sales revenues (from Income statement): $32,983,000.
  • Fixed Assets (Total Property, Plant & Equipment, from Balance Sheet) = $9,716,000

Total Asset Turnover
             = Net Sales Revenues / Total Fixed Assets
             = $32,983,000 / $9,716,000
             = 3.4 Total Fixed Asset Turns / year

For any company, Fixed Asset Turnover will of course always be higher than Total Asset Turnover (next section).

Using Fixed Asset Turnover

Fixed Asset Turnover usage guidelines rules of thumb are very similar to guidelines for Total Asset Turnover (following section).

  • The important information for any company in Fixed Asset Turnover metrics has to do with year to year changes. Generally, Fixed Asset Turnover rates should increase from year to year.
  • Large investments in fixed assets are necessary in order to operate in some industries (power generation or heavy manufacturing, for instance). Operating in other industries may require very few fixed assets (consulting or other professional services, for example). In still other industries, some companies choose to acquire operational assets such as buildings, computer systems, and vehicles, while other companies in the same industry utilize the same assets through operating lease or rental contracts which leave asset ownership to other parties. For these reasons, comparing Fixed Asset Turnover ratios with industry standards or between companies should be done cautiously.

Turnover Metric 5
Total Asset Turnover

Companies acquire assets for the purpose of generating revenues. Total Asset Turnover (this section) and the metric in the previous section (Fixed Asset Turnover) compare directly the revenue "returns" from the company's assets (sales revenues) to the book value (Balance Sheet value) of the assets. The higher the Asset Turnover Rate, the shorter the time required for assets to generate their own value in sales.     
These metrics are considered activity or efficiency metrics. They should not be confused with profitability metrics, such as Return on Total Assets or Return on Equity (those appear in this encyclopedia under profitability metrics).

How Do You Calculate Total Asset Turnover?

Total Asset Turnover is the ratio of Net Sales Revenues (an Income statement entry) to Total Assets (a Balance Sheet entry). From the example financial statements below:

  • Net Sales Revenues (from the Income Statement): $32,983,000.
  • Total Assets (from the Balance Sheet): $22,075,000.

Total Asset Turnover
             = Net Sales revenues / Total assets
             = $32,983,000 / $22,075,000
             = 1.49 Total Asset Turns / year

Using Total Asset Turnover

Fixed Asset Turnover usage guidelines rules of thumb are very similar to guidelines for Fixed Asset Turnover (previous section).

  • The important information for any company in total asset turnover metrics has to do with year to year changes. Generally, total asset turnover rates should increase from year to year.
  • Large investments in assets are necessary in order to operate in some industries (power generation or heavy manufacturing, for instance). Operating in other industries may require very few fixed assets (in consulting or other professional services, for example). In still other industries, some companies choose to acquire operational assets such as buildings, computer systems, and vehicles, while other companies in the same industry utilize the same assets through operating lease or rental contracts which leave asset ownership to other parties. For these reasons, comparing total asset turnover ratios with industry standards or between companies should be done cautiously.

Turnover Metric 6
Sales Revenue Turnover Per Employee

Sales Revenue Turnover per Employee is a simple but informative measure of the firm's ability to generate sales revenues with its employee population. Firms often state publicly that "employees are our most important assets," but employee value does not appear on the Balance Sheet. Nevertheless, employees are costly resources that should produce returns. While the Balance Sheet itself does not measure employee value this way, this metric, Sales Revenue Per Employee, does provide a rough  measure.

How Do You Calculate Sales Revenue Turnover per Employee?

Sales Revenue Turnover per Employee requires only two data items. For example,

  • Net Sales Revenues for year (from Income Statement Exhibit 5): $32,983,000 
  • Average employee headcount for the year: 500

Sales Revenue per Employee
             = Net Sales Revenues for year/ Employee headcount for year   
             = $32,983,000 / 500
             = $65,966

For growing companies, or companies shrinking in size, employee headcount at year end may be quite different from the year's average value. Where employee numbers fluctuate significantly during the year, the yearly average yields a better measure of efficiency than the year-end headcount. For firms with highly seasonal sales and employee headcounts, "Sales revenue turnover per employee" metrics are better evaluated on a quarterly (or monthly) basis.    

Using Revenues Turnover per Employee Metrics

  • A firm can be profitable only if the measure of Revenue turnover per employee is greater than the firm's cost per employee. Revenue turnover per employee greater than per-employee cost does not guarantee profitability, but it is a prerequisite for profitability.
  • Year-to-year growth in sales revenues per employee should at least keep pace with inflation and rising costs per employee.

Third Turnover Meaning: Employee Churn Rate
Employee Population Turnover Rate

Turnover may refer to Churn or Replacement Rate in a firm's employee population. Turnover in this sense complements the concept of employee retention. For employers, employee turnover can bring both benefits and costs. Generally, however, high employee turnover rates are viewed as costly problems that need management attention.

When a company with 1000 employees loses 100 employees during a year, , the company is said to have an employee churn rate of 10%:

Employee Churn Rate
      = Employees lost during year / Number of Employees
      = 100/1000
      = 0.10 or 10.0%

Employee Retention Rate
      = 1.0 – (Employee Churn Rate)
      = 1.0 – 0.10 
      = 0.90 or 90.0%

Annual employee churn of some kind is inevitable in all large and medium-sized businesses. Exhibit 3, for instance, shows employee churn rates in the US in 2018, by industry segment.

Exhibit 3. Employee churn rates 2018, by industry segments in the United States. Source: John Zapp, TLNT.1

High employee turnover rates and high customer turnover rates normally represent costly problems. However, in the case of Employee churn, there are also some benefits from employee turnover.

Benefits from Employee Turnover

Employers can benefit from employee churn in several ways:

  • Employee turnover enables employers to replace less productive employees with more productive employers. Some employers "prune" the workforce periodically in this way, to maintain high productivity levels. Automobile dealerships, for instance typically hire new sales people for a probationary period, after which they replace those who do not reach sales productivity targets with other new hires.
  • Turnover enables the employer to replace employees with outdated skill levels or knowledge, with entry-level hires who do have up-to-date skills and knowledge.
  • Some employers create employee churn deliberately in order to replace more senior higher paid employees with new entry-level employees at lower cost. Government workplace rules and union rules in many places attempt to prevent this practice.
  • When business volume is declining, employee departures (voluntary or involuntary) can enable employers to reduce employee headcounts to levels more appropriate for current needs. Both proponents and critics of this practice sometimes call this kind of action rightsizing.

Employer Costs from Employee Turnover

Employee turnover rates also bring employer costs--which can outweigh the benefits of churn:

  • Recruiting costs and new-hire training costs for replacement employees.
  • Severance pay and other benefits for employees laid off (redundant or downsized employees).
  • Lost productivity while new-hires acquire skills on the job and ramp up to full productivity.
  • Loss of knowledge and skills that leave with departing employees.
  • Disruption of workforce momentum, especially where work tasks are "team."

Why Do Employees Leave Voluntarily?

Employees leave for a variety of positive and negative reasons. They may choose to leave because of low pay, lack of compensation or recognition for high achievement employees, or availability of higher pay or better advancement opportunities elsewhere. It is well known, for instance, that successful employees in some industries advance their careers through continuous job shopping, changing employers every 2 or 3 years or even more often. At the same time, less "marketable" employees have less opportunity to advance in this way.

Individual employees also choose to leave for a variety of personal considerations such as a burdensome commuting distance. However, knowledgeable HR managers know well that poor people management  is the major reason for voluntary departures in most turnover cases:

They say "people don’t leave jobs, they leave managers," and a survey by B2B marketplace Approved Index confirms that this adage is true. In its survey of 1,374 employees in the U.K., nearly half (42%) of them have left a job because of a bad boss and almost a third of them feel their current boss is a bad manager.
— Karen Higgenbottom, "Why Employees leave," Forbes2

Fourth Turnover Meaning: Customer Churn
Turnover in Customer / Subscriber Base

Turnover may refer to Churn or Turnover Rate in a firm's customer baseor subscriber base. Turnover in this sense complements the concept of customer retention. Customer churn is always a cost to the seller--never a benefit. For businesses that rely in repeat business, a high customer churn rate represents a costly problem that calls for management attention.

A n mobile phone service provider, for instance, may have 1,000,000 customers, including both prepaid-service service customers and subscribing customers. If 200,000 of these fail to renew their prepaid services or renew their subscriptions during the year, and if the same company replaces the departing customers with new customers, the company has a customer churn rate of 20.0%:

Customer Churn Rate
      = Customers lost and replaced during year / Size of customer base
      = 200,000 / 2,000,000
      = 0.20 or 20.0%

Customer Retention Rate
      = 1.0 – (Customer Churn Rate)
      = 1.0 – 0.20 
      = 0.80 or 80.0%

Some customer churn is unavoidable in virtually every industry and market, but especially so where firms compete intensely for market share. Exhibit 4, for instance, shows 2018 customer churn rates by industry, in the United States.

Exhibit 4. Customer churn rates 2018, by industry, in the United States., by industry segments.. Source:Statista, 2018..3

The Costs of Customer Churn

Sellers of Goods or Services pay close attention to their customer retention rates (repeat business rates). Businesses in some industries either succeed or fail due to their ability to win repeat business. Restaurants and mobile phone service providers are examples of this situation. For almost all businesses, the loss of repeat business and customer churn can be costly.

  • In competitive industries, loss of repeat business means loss of revenues and loss of market share to competitors.
  • Acquiring new customers is more costly than repeat sales to existing customers. Thus, simply replacing lost customers with the same number of new customers may maintains market share, but this comes with a high cost of sales.

Customer Retention (Combatting Churn) is primarily a Marketing Objective

In competitive industries, sellers of goods or services use a variety of well-known tactics to win repeat business can combat customer churn.

  • Customer loyalty plans have proven very successful in some industries. Airline Frequent Flier plans, for instance, are among the most familiar and most effective tactics for combatting churn. Widespread use of customer loyalty plans has spread, in the last few years, to a wide range of retail goods and services providers (e.g., grocery shops). Usually, with these plans, loyal customers are rewarded with discounts on future purchases or extra services.
  • Mobile phone service providers and other services that sell subscriptions, sometimes attempt to "lock-in" customer loyalty by selling long-term plans that come with heavy fees for early cancellation.
  • Mobile phone service providers and other services that subscriptions also offer incentives in the form of discounts for renewing subscriptions.
  • Moreover, these same providers sometimes make comparison shopping by continuously offering new and complex plans that are not easily compared with competitor's plans.
  • Some restaurants, hotels, and airlines, for instance, place a very heavy marketing emphasis on the quality of their customer service and, in some cases, "customer satisfaction guarantees." It is well proven in these industries that dissatisfied customers do not become repeat customers.

Example Detailed Income Statement
Including Turnover Metrics Input Data

Exhibit 5 The example Balance Sheet in Exhibit 5 below provides some source data for efficiency and activity turnover metrics illustrated above. The example below has a level of detail typical for an Annual Report.

Grande Corporation                                   Figures in $1,000's
Income Statement for the Year Ended 31 December 20YY   
Gross sales revenues
   Less returns & allowances
      Net sales revenues
Cost of goods sold
   Direct materials
   Direct labor
   Manufacturing Overhead
      Indirect labor
      Depreciation, mfr equipment
      Other mfr overhead
      Net mfr overhead
         Net cost of goods sold
Gross Profit






Operating Expenses
Selling expenses

   Sales salaries
   Warranty expenses
   Depreciation, Store equip
   Other selling expenses
          Total selling expenses
General & Admin expenses
   Administrative salaries
   Rent expenses
   Depreciation, computers
   Other general & admin expenses
      Total general & admin exp
           Total operating expenses
Operating Income Before Taxes





  Financial revenue & Expenses
  Revenue from investments
      Less interest expense
      Net financial gain (expense)
  Income before tax & ext items
  Less income tax on operations
    Income before extraordinary items


Extraordinary Items
   Sale of land
   Less initial cost
      Net gain on sale of land
      Less income tax on gain
         Extraord items after tax


Net Income (Profit)       2,126

Exhibit 5. Detailed example Income statement, providing input data for Turnover metrics. The example shows how Revenue and Expense account items represent the Income statement equation:
    Income = Revenues – Expenses.

Example Detailed Balance Sheet
Including Turnover Metrics Input Data

The detailed example Balance Sheet in Exhibit 6 below provides some source date for efficiency and activity turnover metrics illustrated above.

Grande Corporation                                   Figures in $1,000's
Balance Sheet at 31 December 20YY   
Current Assets
   Short-term investments
   Accounts Receivable
      Less allowance doubtful accts
      Net accounts receivable
   Notes receivable short-term
      Raw materials
      Work in progress
      Finished goods/merchandise
      Operating & office supplies
            Total Inventories
   Prepaid exp, insurance, def taxes
          Total Current Assets






Long-Term Investments and Funds
   Common stock held
   Preferred stock held
   Bonds Held / Sinking funds
   Other Long-Term Investments
          Total Long-Term Investments

Property, Plant & Equipment
   Factory Manufacturing Equipment
      Less accumulated depreciation
      Net factory mfr equipment
   Store Equip / Selling Assets
      Less accumulated depreciation
      Net store/selling equipment
   Computer systems
      Less accumulated depreciation
      Net computer systems
           Total Property, Plant & Equip






Intangible Assets
   Trademarks and Patents
          Total Intangible Assets

Other Assets
                    Total Assets
Current Liabilities
   Accounts payable
   Notes payable, short-term
   Current portion of long-term debt
   Accrued expenses, Interest payable
   Unearned revenues
   Taxes payable Other withholding
          Total Current Liabilities


Long Term Liabilities
   Bank notes payable
   Bonds payable, other LT liabilities
          Total Long Term Liabilities
                    Total Liabilities

Contributed Capital
   Preferred stock
   Common stock
   Contributed capital excess of par
          Total Contributed Capital

Retained Earnings
          Total Owners Equity




          Total Liabilities and Equities

Exhibit 6.Balance Sheet with input data for efficiency and activity turnover metrics examples.

See the Excel-based ebook Financial Metrics Pro for a complete introduction to cash flow metrics and financial statement metrics (Business ratios).


1. Zapp, John. "Who Has the Highest Turnover Rates?" https://www.tlnt.com/who-has-the-highest-turnover-rates-hint-its-not-retail/.

2. Higginbottom, Karen. "Bad Bosses At the Heart of Employee Turnover," Forbes,https://www.forbes.com/sites/karenhigginbottom/2015/09/08/bad-bosses-at-the-heart-of-employee-turnover/#54173ed4e632.

3. Statista, 2018. Customer Churn Rate By Industry - US. https://www.statista.com/statistics/816735/customer-churn-rate-by-industry-us/