# Capital turnover

## What Is Capital Turnover?

Capital turnover is a term used to describe the efficiency with which a company is able to utilize its capital resources. It is a measure of how much money a company is able to generate from its capital investments, such as stocks, bonds, and other assets. It is an important indicator of a company’s overall financial health and can help investors assess the potential for future growth.

## How to Calculate Capital Turnover

Capital turnover is calculated by dividing the total amount of sales generated by a company by the amount of capital it has invested. The resulting figure is then multiplied by 100 to give a capital turnover ratio. This ratio can be broken down further to show the specific capital turnover for each asset class.

## Examples of Capital Turnover

One example of capital turnover is a company that has invested \$100 million in stocks and generates \$1 million in sales. The capital turnover ratio in this case would be 1:100. This means that for every dollar invested in stocks, the company generates one dollar in sales. Another example is a company that has invested \$50 million in bonds and generates \$2 million in sales. The capital turnover ratio in this case would be 4:50, indicating that for every dollar invested in bonds, the company generates four dollars in sales.

## Conclusion

Capital turnover is an important measure of a company’s financial health and performance. It indicates how efficiently a company is able to utilize its capital resources and can be used to assess the potential for future growth. Investors can use capital turnover ratios to evaluate a company’s ability to generate returns from its investments.