ABSTRACT
The “turnover rate,” or investment turnover, is an indicator of how capital-intensive a business is, or how many dollars in investment are needed to support dollars in revenues. At a given level of sales dollars, one will find a somewhat linear relationship to investment dollars. Operating decisions have a major impact on Return on investment (ROI) results. Since most decisions are reflected in the financial statements and since ROI reflects financial results, to a large degree ROI results can be controlled by the company. As pointed out previously, the reason the ROI ratio is broken down into two components is to review the relationship of earnings to sales and the rapidity with which committed capital is being used effectively. A major part of the decision-making process for both evaluating ROI results and providing a company with the ability to establish attainable ROI objectives for the overall business, as well as business segments, is the reviewing of industry results.
