 Turnover ratios tell us that how much efficiently a firm has turned over the amount invested in assets into the sales. That is why these ratios are also called as management ratios or asset management ratios or efficiency ratios. In this class, we have inventory turnover ratio. This ratio tells us that how much efficiently a firm has converted the amount invested in its inventory into sales. The formula of this ratio is cost of sales over average inventory. If we have cost of sale of Rs 435,000 and inventory of Rs 75,000 and we divide cost of sales with the inventory, forget the ratio of Rs 5.80. This means for every Rs 1 invested in inventory, the firm has generated a cost of sale of Rs 5.8. So the inventory has been converted into cost of sales by 5 times. This means that higher is the ratio, higher is the efficiency level of the management and lower is the ratio and lower is the management efficiency. Then we have inventory turnover in days. This means that how much days a firm takes in order to replace an inventory in the go-down. The formula of this ratio is 365 days in the year over inventory turnover ratio. Are these another version? We can use the variable working days in a year in place of 365 days. In this example, we have 365 days and 5.8 times as inventory turnover ratio. If we divide 365 over 5.8, we get an answer of 63. This means that in this particular example, firm needs 63 days to make its go-down empty. This means inventory with the firm holds 63 days in its go-down. Now what is the relationship between turnover ratio and inventory turnover ratio? In a days, there is an inverse relationship. This means that higher the turnover ratio, lesser is the turnover in days and vice versa. So if the turnover ratio is higher, so turnover in days will be lesser and this would show the better management of inventory by the firm. Next we have data turnover ratio. This ratio tells us that how much times a firm has generated sales with reference to its investment in the debtors. We have two variables, a net sale and receivables. In this example, we have net sales of 1.0345 million and receivables of 0.125 million. And if we determine the ratio, we have an answer of 8.28 times. This means that the firm has generated more than 8 times of an amount invested in its debtors or receivables. In simple words, every rupee invested in debtors has been converted into a sale of 8.28 rupees. So higher is the ratio. This means the firm has better managed its receivables. If we determine the debtors turnover in days, we simply divide 365 days or working days in a year divided by average and receivables turnover ratio. Using this example, we divide 365 over 8.28 and we get the answer of 44. This means that the firm gives 44 days to its debtors to pay off their debt. Again there is an inverse relationship between debtors turnover ratio and debtors turnover ratio in days or collection period. Debtors collection period, higher is the debtors turnover ratio, lesser is the collection period. Using this example, letting other things remaining the same, we may say that if the firm reduces its debtors collection period, the firm must have geared up its debtors turnover ratio. Then we have payables turnover ratio. This ratio tells us that how much time a firm takes in order to pay off its creditors. The formula to determine this ratio is purchases over creditors. If we use an example of payables turnover ratio, let's say we have 437,300 s an amount in purchases and 1,175,000 rupees as creditors. We divide purchases over creditors to get a ratio of 2.5 times. This means that for every rupee taken from creditors, the firm has generated our purchases equal to 2.5 times of the creditor. Similarly, if we want to determine payables turnover ratio, we divide 365 days or working days in a year over creditors turnover ratio. Using this example, we have 365 days and 2.5 times the turnover ratio. The answer we get is 146 days. This means that the firm has a payment period of 146 days. So apparently this seems very good that the firm has a spontaneous credit of 146 days. The firm has to pay after 146 days. So during this period, the firm can use this amount on its other needs. But we have to remember that if we stretch the collection period, there may be a problem for the firm in terms of lose out of the debtors. And if a firm wants to extend its collection period, then the goodwill of the firm may be impaired. So a firm has to create a balance between these two. Then we have total assets turnover ratio. This ratio tells us that how much amount invested in the total assets a firm has converted into its sales. So higher is the ratio, higher is the assets management or efficient management done by the company. If we have sales of 1.034 million and total assets of 2 million, we get a ratio of 0.5 to 2 times. This means that firm has just created sales equal to half of its assets. Apparently it's not a good management of the assets. At least minimum the turnover ratio in assets should be equal to 1. Finally, we have capital implied turnover ratio. This ratio tells us that how much funds firm has invested into its assets in order to generate a sale of rupee 1. If we have sale of 1.0345 million and capital implied of 1.497 million and we get a ratio of 0.70, this means that firm has just generated a sale equal to 70 percent of the funds invested in assets. So apparently this is not a much efficient use of the capital implied. The firm has been able to create only a portion of the capital invested.