The Cash Turnover Ratio indicates the number of times cash is turned over in an accounting period. It measures how many times a company utilizes its cash to generate revenue. It is more effective for companies that do not offer credit sales.
A high ratio is considered good as it indicates that the company has a sufficient cash management system and quick cash flow. A low ratio indicates that the company is not managing its cash efficiently to generate revenue.
This metric is useful to compare companies with the same (or similar) industries.
The formula for Cash Turnover Ratio
Example: For the financial year, Dixon Technologies Limited reported Total revenue as Rs. 6448.17 and Cash and Cash Equivalent as Rs. 176.17.
The value as per the formula (Total Revenue / Cash and Cash Equivalent) is calculated as (6448.17 / 176.17) = 36.60.