This section is from the book "Business Finance", by William Henry Lough. Also available from Amazon: Business Finance, A Practical Study of Financial Management in Private Business Concerns.
The definition of the term and the reasons for laying great importance upon quick turnover have previously been discussed. The additional point that belongs in this chapter is a statement as to the ratio of turnover which may be accepted as standard in various lines of business. This statement is by no means complete or conclusive, but is based upon the fragmentary information which it is now possible to obtain from the records of business firms.
A cotton goods commission house which does a little financing of sales, employs some traveling salesmen, and carries no stock, has total working assets of $400,000. The annual sales of this house are about $3,500,000, showing a turnover of nearly 900%. This is regarded as a good, though not abnormal, showing.
A large department store is said to carry an average stock of $8,000,000 to $10,000,000, and to have average sales of $15,000,000 to $20,000,000, showing a turnover of 200%.
It is said, on excellent authority, that many retail grocers make a complete turnover at least once a month, equivalent to 1,200% for the year, while country stores, which are forced to carry a large assortment of stock, are well satisfied to do 300 to 400%. One small retail store is recently reported to have done 900%, but this is an extraordinary showing.