What Is Turnover in Business?

ONOKY – Fabrice LEROUGE/Brand X Pictures/Getty Images

When it comes to all things business, turnover represents the rate at which any asset is replaced or revolved during a certain time period. In terms of assets such as inventory, raw materials and cash, the accounting period is normally used as the timetable. In terms of human resources or employees, however, a revolving 12-month period is often used to calculate turnover.

Turnover can be positive or negative, depending on the assets in question. For example, when inventory turns over quickly, there may be less waste due to spoilage. A high turnover rate also means that a company is selling more product, which equals more profit. However, when it comes to employees, a high turnover rate can point to poor management and an unhappy workforce.

Turnover is a term used in the financial world as well. In this sense, turnover represents the volume or value of shares traded on the stock market during any given period. On a more individual level, turnover can represent the number of times a trade is made within a single portfolio. If there are too many trades made within a certain period, a broker can be accused of “churning,” which is a process that generates more commission for the broker.