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In today’s Commerce class, We will be learning about Business Finance. We hope you enjoy the class!
This refers to the total net sales during a period. The turnover is variously referred to as the stock-turn, sales turnover or stock-turnover.
THE RATE OF TURNOVER (or Rate of Stock – turn)
This refers to the number of times average stock is sold during a given period, usually a year.
It is calculated by dwindling the cost of goods sold by average stock. This means that to find the rate of turnover first, the cost of goods sold must be calculated thus:
COST OF GOODS SOLD N
Opening Stock 5,000
Add purchases 35,000
Less: Closing stock 8,000
COST OF GOODS SOLD 32,000
COST OF GOODS SOLD: N
Less: Gross profit 18,000
Secondly, the average stock must be calculated thus:
FACTORS AFFECTING THE RATE OF TURNOVER OF A BUSINESS
The number of times a trader buys goods and resells them determines the size of his gross profit. In other words, a trader’s gross profit can be increased by boosting his rate of turnover. The various measures to be applied to increase the rate of turnover of a business can be inferred by considering the following factors which affect the rate of turnover.
- Nature of the product.
- Advertisement and Sales Promotion
- Location of the business.
- Goodwill or reputation of the seller
- Wide variety of products offered for sale
- Reliability and frequency of supply
- Credit facilities.
- Application of modern sales techniques e.g. self-services that encourage impulse buying
- The number of sales outlets or branches of the business.
- Distinguish between turnover and rate of turnover.
- If the cost of goods sold is N4000 and the stock is turned over five times yielding a profit of 10% on sale, calculate the:
(a) Average stock
(b) Gross profit
Essential Commerce for SSS by O.A Longe page 131-143.
GENERAL EVALUATION QUESTIONS
- Describe four types of risks that may be insured against under marine insurance
- State and explain five classes of shares a public limited company can issue
- Explain seven reasons for government participation in business enterprises
- State seven demerits of government participation in business enterprises
- State seven characteristics of a co-operative society
- Outline any seven factors, which might affect the rate of turnover
- Distinguish between gross profit and net profit.
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In our next class, we will be learning about Business Finance. We are very much eager to meet you there.
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