TURNOVER ANALYSISPhD Dumitru D. Popescu

*DefinitionThe turnover expresses the total revenues obtained by a company from its current commercial activities and is one of the most important indicator that shows the economical performances of a company.

The turnover allows the determination of the market position of a company, gives information about the dynamics of the activity, about the chances of development or about the importance of the company within the sector of activity.

*Operational ratios used in the turnover analysis net turnover (T) it represents an indicator of the Profit and Loss Account, formed by the total revenues obtained from the sale of goods and services from the current activity of the company, including the subsidies from investments, after deducting the trade discounts.average turnover also known as average selling price, represents the revenue obtained from the sale of one unit of good or service and is computed using the following formula: where Q represents the physical volume of salesmarginal turnover (Tm) expresses the variation of revenues from sale generated by the increase with one unit of the physical volume of sales and is computed using the following formula:

*break-even point (BEP) represents the profitability level of the company and is the level of sales revenues necessary for the total covering of the operating expenses. The computation formula was established from the basic idea that in the moment of reaching the break-even point, the profit is null and the total expenses as compared with the volume of activity is grouped in fixed and variable expenses. where:FE represent the fixed expensesRVE represents the ratio of variable expenses, respectively the average variable expenses to 1 ROL turnover, computed using the following formula:

*The analysis of the dynamics of turnoverThe analysis of the time evolution of turnover can be done using the classical statistical modelsThe study must contain information afferent to a period of 3-5 years. On the basis of the conclusions drawn from this analysis, there can be established the development strategies of the company for the following years, taking into account the factors that can influence the activity of the company

*The analysis of the dynamics of the turnover for a time period (0, n) is done on the basis of:Fixed-base (FB) or chained-base (CB) absolute changes

Fixed or chained-based ratios Fixed or chained-based increase rate Annual average increase rate

*The analysis of turnover over a longer period of time gives information about the activity of the enterprise and its trendIn order to be relevant for the establishment of the development strategy of the company, the dynamics of the analyzed company should be compared to the dynamics of the market and of the activity sector. If the market is more dynamic than the company, it will be noticed that the company will loose market share, either due to the increase of the sales of the competitors at a higher pace, or due to the entrance in the market of new competitors.

*For a pertinent analysis of the reality it is necessary to adjust the nominal indicators (current, statistical values) with the inflation rate corresponding to the activity sector of the company.The comparability of the data in time can be insured by deflating or inflating the indicatorsDeflation implies expressing the data of the analyzed period in constant monetary units, afferent to the first year, considered the base. The adjustment will be made on the basis of the following relation:Where:TR represents the real or comparable turnoverTC represents the current turnoverIpn-m/0 represents the price index, reported to the first year of the analyzed period Inflation implies the adjusting of the value indexes to the last year of the analyzed period, using the following formula:Where:Ipn/n-m represents the price index, reported to the last year of the analyzed period

*The analysis of the turnover structureIn the economic and financial analysis of high importance in the determination of the causes and reserves of the increase in turnover is the study of the sale structureThe structure of the turnover emphasizes the weight of certain elements in the total sales of a companyThe structural analysis can be done on different elements, such as:On types of activitiesOn groups of products/goodsOn types of clients

*MethodologyDetermination of the weight of different elements (products, merchandises, services, activities, departments etc.) in the total turnover, by using the relative measurements of the structure:Where:gi represents the weight of i category in the total turnoverti represents the turnover realized by i categoryT represents the total turnoverComparisons between the structure of the economic activity for different financial periods, using the Gini-Struck structure coefficientWhere:n represents the number of terms of the seriesgi represents the structure of sales on categories of activities, groups of products, operating units etc.

*The Gini-Struck coefficient can take values in the interval [0,1], having the following significance:G1 means that in the structure of the activity of the company, a low number of elements have an important weight in the turnover, or, in other words, the concentration degree of the activity is highG0 means that the sales are spread rather even between the categories of structure of the activity

*Factorial analysis of turnoverThe scope of the factorial analysis of the turnover is the determination of the contribution of different factors over the change of turnover, as well as the substantiation of the solutions for improving the company performance

*The factorial analysis of turnover in the case of production companies1. Models that correlates human resources and turnovera)

any change in one of the three factors have an influence in the same way over the turnoverthe factorial analysis is done using the chain substitution method for the comparison of the effective results with the ones from the reporting baseWhere:E represents the average number of employeesQd represents the production obtained intended for deliveryQd / E represents the average annual labor productivity (computed on the basis of the production intended for delivery)T / E represents the degree of capitalization of the production obtained intended for delivery

*b)

- The turnover analysis taking into account the influence of the average number of operating employees is important because it is well known that the operating employees are directly involved in the production process and thus the efficiency of the human resources is determined in a great proportion by the weight of the operating employees in the total number of employeesWhere:Eop represents the average number of operating employeesEop / E represents the weight of the operating employees in the total number of employees of the companyQd / Eop represents the average productivity of the operating employees

*c)

Where:Ed represents the average number of days worked by an employee in the analyzed periodEh represents the average number of hours worked by an employee in one dayPh represents the average hour productivity of one employee- is the total work time of the company (man hours)- is the average working time of one employee (hours)- is the average daily productivity- is the average annual productivityThis model emphasizes the way of utilization of the work time, from a quantitative point of view, as well as from a qualitative point of view.

*Models which express the correlation between the technical potential of the enterprise and turnover

a)

b) Where:FA average value of fixed assetsFA average annual value of directly productive fixed assetsFA / E degree of technical endowment of laborFA / FA weight of directly productive fixed assets into the total fixed assets (technological content of fixed assets)Qd / FA efficiency of directly productive fixed assets (production obtained intended for delivery to 1 m.u. of fixed assets) The degree of technical endowment of labor is a relevant indicator for the enterprise, because it reflects the result of the investments made. It is obvious than, in the context of a dynamic market economy, characterized by a very harsh competition, the company with the best investment power and with higher technical endowment of labor will win in the battle for market share. This has a direct positive effect over the labor productivity and an indirect effect over the results of the company.

*Models which express the correlation between turnover and the degree of providing current assets (raw materials, consumables etc.) to the workforce

Where:I / E emphasizes the average value of inventory afferent to one employee or the degree of providing inventories to the employeesT / I expresses the inventory turnover (number of rotations)In this model, it is important not only the value of current assets, but also their structure, because the realization of a product implies the necessity of providing all the material resources involved in the production process.

*Models which express the correlation between the volume of the production sold and turnoverAccording to the characteristics of the production, we have:Homogenous production, with differences of models, qualities etc.

Non-homogenous production

Where:q x vi the volume of the production sold for type i products

*The consequences of changes in turnover over the main economical and financial indicatorsInfluence over the gross profit

Influence over the salary expenses

Influence over the return on assets

*Influence over the current assets turnover

Influence over the efficiency of fixed assets utilization

Influence over the labor efficiency

*Influence over the total expenses (variable, fixed etc.)

Influence over the commercial margin