A business owner can use this money to pay investors in the form of dividends, purchase new equipment for the business and even pay himself if he chooses. The resulting figure represents how much net profit a business brings in from the sale of its goods and services. In business accounting, net turnover is the measure of annual sales volume minus all costs, including state sales tax and discounts. These ratios are used by fundamental analysts and investors to determine if a company is deemed a good investment. Turnover ratios calculate how quickly a business collects cash from its accounts receivable and inventory investments. Following this system, the fund owns positions in equities as long as they remain components of the benchmark. Index funds such as the Fidelity Spartan 500 Index Fund adopt a buy-and-hold strategy. Remember that turnover is measured over a specific period, for example a tax year. An example of turnover is when new employees leave, on average, once every six months. Turnover is the rate at which employees leave or the amount of time that it takes for a store to sell all of its inventory.
Thus, it does not include gains from financial or other activities, such as interest income, gains on the sale of fixed assets, or the receipt of payments related to insurance claims. Sales turnover is restricted to revenue generated from operations. This occurs because the business puts the majority of worker efforts into the creation of items consumers are actually buying. A quick turnover rate generates more commissions for trades placed by a broker. In the investment industry, turnover is defined as the percentage of a portfolio that is sold in a particular month or year. When these assets generate income by sales it is termed as revenue. For example, assets and inventory are turned over when they flow through a business either by the sale of assets or outliving their useful lives. Revenue and Turnover are often used interchangeably and in many contexts, they also mean the same. Thus, turnover and profit are essentially the beginning and ending points of the income statement – the top-line revenues and the bottom-line results. Turnover is the net sales generated by a business, while profit is the residual earnings of a business after all expenses have been charged against net sales. The figure is useful to determine how actively the fund changes the underlying positions in its holdings. Portfolio turnover is the comparison of assets under management (AUM) to the inflow, or outflow, of a fund’s holdings.
Annual turnover is the percentage rate at which a mutual fund or an exchange-traded fund (ETF) replaces its investment holdings on a yearly basis.
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