The terms “turnover” and “revenue” are often used interchangeably, and in some contexts they even mean the same thing. Assets and inventory turn over when they flow through a business, by being sold or by outliving their useful life. When the assets turning over generate income through sales, they bring in revenue. However, “turnover” can also refer to business activities that don’t necessarily generate sales, such as employee turnover.
Turnover, Revenue, and Profit
While turnover and sales aren’t always the same, they often go hand in hand, such as when the company earns more by handing over inventory more regularly. A high inventory turnover rate that produces sales does not always imply that your business will be profitable. If you reduce all of your inventory to clearance rates in order to sell it quickly, your turnover rate will be high, and you’ll probably make a lot of money, but your profit margin will be low because you’re not charging enough in relation to your inventory costs.
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