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Equity turnover definition

Description

Equity turnover ratio measures how much revenues (sales) are generated for one dollar of total equity. Data to calculate this ratio is collected from balance sheet and income statement.

This ratio is important to company’s owner, because it shows sales on shareholders’ equity.

Norms and limitations

There are no general norms for this ratio.

Formula

Net sales (revenues, sales) can be described as sales deducting returns and discount for customers.

Equity (Shareholders’ equity) shows the equity stake, currently held on company’s balance sheet. In other words, it means total assets minus total liabilities.