1. What is Operating Revenue Turnover?

Operating Revenue Turnover (ORT) is a financial ratio that measures how efficiently a company manages its inventory by comparing sales revenue to average inventory levels. It indicates how many times inventory is sold and replaced during a specific period.

2. How Does the Calculator Work?

The calculator uses the Operating Revenue Turnover formula:

Where:

• \( ORT \) — Operating Revenue Turnover (times)
• \( Sales \) — Total sales revenue (currency)
• \( Average\ Inventory \) — Average inventory value during the period (currency)

Explanation: This ratio shows how effectively a company is converting its inventory into sales. Higher turnover indicates better inventory management and sales performance.

3. Importance of ORT Calculation

Details: Operating Revenue Turnover is crucial for assessing inventory management efficiency, identifying potential overstocking or understocking issues, and evaluating overall operational performance. It helps businesses optimize inventory levels and improve cash flow.

4. Using the Calculator

Tips: Enter sales revenue and average inventory in the same currency units. Both values must be positive numbers. Average inventory is typically calculated as (Beginning Inventory + Ending Inventory) / 2.

5. Frequently Asked Questions (FAQ)

Q1: What is a good Operating Revenue Turnover ratio?
A: Ideal ratios vary by industry. Generally, higher ratios are better, but very high ratios may indicate insufficient inventory levels that could lead to stockouts.

Q2: How does ORT differ from Inventory Turnover?
A: ORT uses sales revenue in the numerator, while traditional inventory turnover uses cost of goods sold. ORT provides a revenue-focused perspective on inventory efficiency.

Q3: What factors affect Operating Revenue Turnover?
A: Sales volume, pricing strategy, inventory management practices, seasonality, and industry norms all influence this ratio.

Q4: How often should ORT be calculated?
A: It's typically calculated quarterly or annually, but can be monitored more frequently for businesses with rapid inventory cycles.

Q5: Can ORT be too high?
A: Yes, extremely high turnover may indicate inadequate inventory levels that could result in lost sales opportunities and customer dissatisfaction.