The Topeka state journal. [volume] (Topeka, Kansas) 1892-1980, 1920-01-26
MEANING OF TURNOVER"
Robert B. Austin Explains System in
Merchandise Dealing.
By ROBERT B. AUSTIN.

BY ROBERT B. AUSTIN.
The average man who in these days
is glib1y discussing turnover and its
proper relation to profits, is in most
Instances talking away over his own
head, and could as well discourse
upon the subject of staphylococcus-
pyogenes-auris.
Unless he possesses some superior
Information concerning the latter his
common sense would tell him that he
had best first inform himself or leave
its discussion to those familiar with
the meaning of the term, but the ext
gency of the day seems to call for
volunteers In soap-box oratory upon
the subject of profits and turnover,
and taking it for granted that general
lack of information will allow his mis-
Heading statements to pass unchal-
Ilenged, he is unabashed in assuming
to discuss technical business terms.
The threadbare misconception OF
the meaning of the term turnover, is
the frequency with which the stock
of a commodity or of department is
repurchased. AS a result, we find re-
ports of committees usurping the
right to fix prices based on turnover.
giving astounding percentages or
gross profits based upon such fallacy.
Even very few merchants (and there
is no other factor which retards or
Eliminates the DTOBICSS Oh d bQ5lliCSo 81
much) have clear conception OF the
meaning of the word turnover.
OF a grocer for instances, whose
profits are under investigation, it IS
stated that because he is repurchaslnS
his stock of a commodity every week,
that he has by reason of his weekly
repurchase, turnover OF equal 10
fifty times annually. ana it is pointed
out that as there is a mark up of
per cent in the commodity, that ne
| has an annual return on his invest
ment of fifty times the rate of mark
up or $50 per cent.
He has not
Assuming that he discounts his pur-
chases land no grocer can long survive
who does not take advantage OF the
saving of cash discount, especially
bearing upon a commodity yielding 3
| he had on hand his average invest
ment in sugar-the same being
! $1,000 On January his stock is ex-
hausted and he repurchases another
| 81 600 worth. Has he made one turn
over? No. The first $1,000, or much
| be there for thirty days or longer, and
it took an additional $1,000 to replen-
| ish his stock on January 8, SO thai
| his investment now stands at $4,000:
altho he has but his average stock OF
$1,000 on hand. Every week during
January an additional $1,000 is added
| to his investment. until on the 29th OF
January he has the greater part OF
| $1,000 invested in sugar, one-fifth In
actual stock on hand and four-fifhs
| in book accounts. and the investment
would remain that large as long as the
book accounts averaged four weeks, SO
that instead of there being fifty turn
overs on the stock carried, there were
but one-fifth that number, or ten.
| The true manner, therefore, to COM
| pute turnover is to take the average
stock and add to it the average
amount of accounts receivable accru-
| ing thereto. using the sum SO obtained
as the divisor, and dividing it into the
total sales of the commodity. The re-
suit is the rate of turnover.
| To go more into detail, the general
average stock of any commodity plus
| the average sales of the commodity
within the average time Of collection
| less its percentage of accounts pay
able will give the average investment
| in the commodity. This average in
yestment divided into the annual sales
of the article will give. the number OF
iturnovers on the money invested. NC
turnover in an investment in any COM
| modify can exceed twelve times in
business where book accounts average
| 1 m mar capt of the months sales.