What is global turnover?
The overall turnover is synonymous with the total revenues of a company. It is a term that is most commonly used in Europe and Asia. For example, the press release from a European or Asian company announcing an increase in overall turnover of 20% last year simply means that gross revenues or total sales have increased by this percentage.
Key points to remember
- The overall turnover equals the total revenues of a business over a certain period of time.
- The term is most commonly used in Europe and Asia, while the use of the terms revenue or sales is more common in the United States.
- Turnover ratios are used by financial analysts to understand the efficiency and profitability of a business based on the data contained in the financial statements.
How the overall turnover works
In the United States, companies use revenue or sales to describe sales. If the overall inventory turnover of an American manufacturing company is 10, it means that the company as a whole has generated $ 10 of income for every dollar of assets.
In the North American context, overall turnover may also refer to certain parameters, such as the rate of work turnover or the rate of assets for an organization as a whole, instead of measuring them for a division. or a specific business unit.
In addition to monitoring trends in the level and evolution of a company’s overall revenue, analysts, bankers and investors also use net revenue (aggregate revenue minus costs of sales (e.g. taxes, discounts and other costs) in a number of financial data. Ratio calculations to assess the health of a company, its efficiency in using its assets and generating profits, and to compare its performance compared to its peers.
The usefulness of some ratios varies by industry, but some of the key ratios include asset and receivable turnover ratios and liquidity turnover ratios. The turnover rate of the assets divides the net turnover of a company by its average level of assets during the year. It is a profitability ratio that measures the ability of the business to use its assets to generate sales.
Receivables turnover is calculated by dividing the net turnover by the average level of the company’s receivables. This measures how quickly a business collects payments from its customers. The liquidity turnover ratio compares a comparison of turnover to its working capital (current assets minus current liabilities) to assess the extent to which a company can finance its current operations.
Turnover and financial reports
The way in which companies communicate their turnover and their reliability to investors and analysts is regularly debated. Most of the concerns relate to when and how products are identified and reported.
The Financial Accounting Standards Board (FASB) and its European counterpart, the International Accounting Standards Board (IASB), have published new revenue recognition standards to determine how companies account for contract revenue / turnover . The changes are designed to facilitate the comparison of reported revenue figures in the financial statements between businesses. The standard comes into force in 2020.