MoneyBestPal Team
A finance term that measures how often an asset is bought or sold within a given period of time.
Image: Moneybestpal.com

The financial term "turnover" describes how frequently an asset is acquired or sold over a specific period of time. It can also be used to describe how much money a company made over a given time frame. Turnover can be used to gauge the effectiveness and performance of a business, an investment, or a market.

A company's inventory turnover ratio, for instance, would be 2 if its average inventory was $5 million and its annual sales were $10 million. This implies that the business sells all of its stock twice a year. A greater turnover ratio shows that the business is effectively managing its inventory and selling its products rapidly.

Similarly to this, if an investor purchases 100 shares of stock A and sells them in a single month, and there are 10,000 shares of stock A outstanding, then the investor's turnover rate for stock A is 1%. This indicates that in a given month, the investor trades 1% of the stock A shares that are on the market. A higher turnover rate suggests greater investor activity and higher trading expenses.