Questions and Answers
Why is turnover important in business?
It helps measure the profitability of a business
Which of the following best defines turnover in business?
The rate at which a business sells its inventory
What does accounts receivable refer to in the context of turnover?
The money a business owes to its customers
Study Notes
Turnover in Business
- Turnover is important in business as it directly affects the liquidity and cash flow of a company.
- Turnover is defined as the rate at which a company sells and replaces its inventory, accounts receivable, or labor during a specific period.
- A high turnover indicates that a company is able to quickly sell its inventory and replace it with new stock, which can lead to increased revenue and better cash flow.
Accounts Receivable in Turnover
- Accounts receivable refers to the amount of money that customers owe to a company for goods or services sold on credit.
- In the context of turnover, accounts receivable turnover measures the number of times a company collects its outstanding accounts receivable during a specific period.
- A high accounts receivable turnover indicates that a company is able to collect its debts quickly and efficiently, which can improve its cash flow and liquidity.
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