(a)What is turnover in commerce? (b) List and explain six factors that determine the turnover of a product.

Answer Details

(a) What is turnover in commerce?

Turnover is the total value of sales made by a business within a given period, usually one year. It may also be described as the rate of stock-turn, that is, the number of times the average stock of a trader is sold and replaced within a trading period. It is calculated as:

\[ \text{Rate of stock-turn} = \frac{\text{Cost of goods sold}}{\text{Average stock at cost}} \]

A high turnover generally means goods are selling quickly.

(b) Six factors that determine the turnover of a product

1. Price of the product: Goods that are reasonably priced tend to sell faster and record higher turnover than over-priced goods.
2. Quality of the product: Good-quality, durable and attractive goods sell more quickly than inferior ones, raising turnover.
3. Nature of the product: Perishable and everyday necessities (such as bread and vegetables) have a faster turnover than durable goods (such as furniture).
4. Advertising and sales promotion: Effective advertising creates awareness and demand, increasing the rate at which goods are sold.
5. Location of the business: A shop sited in a busy, densely populated area attracts more customers and sells more than one in a remote area.
6. Level of income of consumers: When people's incomes are high, they buy more, so turnover rises; low income reduces sales.

(Other valid factors include the level of competition, seasonal changes in demand, and the efficiency of the sales staff.)