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What Is Net Turnover?

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  • Written By: A. Leverkuhn
  • Edited By: Andrew Jones
  • Last Modified Date: 18 November 2016
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Net turnover is a general term that is used in business and accounting to refer to the net value of either combined income over a given time period, or the “turn over” of an asset or other valued item during the same time frame. A technical definition for net turnover, from an accounting perspective, is net income before value added tax (VAT), and after trade discounts. Similar definitions govern the use of this variable in modern business and accounting.

In the most general sense, net turnover in accounting is the net income for a business. This figure often gets marked into book-keeping systems periodically. A slightly different definition, which still assesses income, is the amount of income that the business has made on one asset or service class. For example, net turnover on an asset will be the number of times, during the year or other time frame, that the asset has provided its own value, or “turned over.” This leads to turnover figures expressed in percentages, where, for example, an asset worth $2000 that yields $3000 will be said to “turned over” 1.5 times.

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Other definitions for turnover relate to services or inventory for a business. Accountants can also assess how many times during a given period an inventory has “turned over.” While this still addresses value, it only addresses value relative to the volume of inventory, not assessing value strictly on the basis of total income. For example, if an inventory of ten widgets was replaced 1.5 times over a year, the annual net turnover would be 1.5, again, after any applicable mitigating factors.

The word “net” in the term distinguishes this value from “gross” turnover, which would be the turnover number before any taxes or discounts have been applied. These two different terms provide ways for accountants to show “real values” in ways that business leaders can understand and use in different ways. The net value often provides the more “real” value because it takes more factors into account. Accountants might also clearly mark the difference between gross turnover and net turnover to show how changing factors affect value.

Turnover, can also apply to the loss and gain of employees. The net value for turnover might apply here as well, though commonly, employee turnover does not include gross or net valuations. In general, employee turnover also helps businesses assess cost.

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