CASH TURNOVER Meaning and
Definition
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Cash turnover is a financial ratio that measures the efficiency and effectiveness of a company's cash management. It assesses how many times a company's cash balances are utilized or turned over within a specific period, typically a year. It indicates how quickly a company generates cash from its operations and how well it manages its cash flow.
To calculate cash turnover, the average cash balance for a specific period is divided by the net sales during that period. The resulting ratio represents how many times the average cash balance is replaced by cash generated from sales within that time frame. A higher cash turnover ratio indicates that the company is more efficient in converting its sales into cash.
This ratio is significant because it sheds light on a company's liquidity and its ability to meet its short-term obligations promptly. It demonstrates the effectiveness of a firm's cash management practices, with a higher ratio indicating better utilization of cash resources. Additionally, a higher cash turnover ratio might also suggest that the company is maintaining lower cash balances, as it is utilizing its cash quickly, which can result in lower financing costs.
By analyzing the cash turnover ratio over multiple periods, analysts can detect trends and assess the impact of changes in the company's operations, sales, or cash management strategies. Investors and creditors often use the cash turnover ratio to evaluate a company's financial health, solvency, and how efficiently it manages its cash flow.
Common Misspellings for CASH TURNOVER
- xash turnover
- vash turnover
- fash turnover
- dash turnover
- czsh turnover
- cssh turnover
- cwsh turnover
- cqsh turnover
- caah turnover
- cazh turnover
- caxh turnover
- cadh turnover
- caeh turnover
- cawh turnover
- casg turnover
- casb turnover
- casn turnover
- casj turnover
- casu turnover
- casy turnover
Etymology of CASH TURNOVER
The word "cash" originates from the Middle English word "casch" which means "money", derived from the Old French term "caisse" meaning "money box" or "chest". It can be traced back to the Latin word "capsa" meaning "box" or "chest".
The word "turnover" comes from the Middle English term "turnen over", which means "to rotate" or "to change". It consists of the combination of "turnen" meaning "to turn" and "over" meaning "above".
Combining these two words, "cash turnover" refers to the process of circulating or changing money within a business or financial transaction.
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