[Verse 1]
Every company has assets on their books today
Inventory sitting, customers who need to pay
But having stuff ain't enough to make your business strong
You gotta turn those assets fast to keep the cash flow on
The question that the analysts are asking every year
How well do you convert your assets into revenue here
Three ratios will tell the tale of efficiency and speed
Let's break them down so you can learn just what investors need
[Chorus]
Turn it over, turn it over, that's the key to understand
Inventory turnover shows how fast you move your hand
Receivables are spinning when your customers pay fast
Asset turnover total tells you if your sales will last
Higher numbers, faster turning, efficiency is king
Activity ratios tell you everything
[Verse 2]
Inventory turnover takes your cost of goods and sales
Divide by average inventory, that's how this ratio scales
If you're moving products quickly, this number will be high
But if your stock is sitting still, your turnover's gonna die
Calculate it simply: cost of sales on top
Average inventory below, now watch your pencil drop
A grocery store might turn it fifty times within a year
While heavy equipment companies might turn it twice, that's clear
[Chorus]
Turn it over, turn it over, that's the key to understand
Inventory turnover shows how fast you move your hand
Receivables are spinning when your customers pay fast
Asset turnover total tells you if your sales will last
Higher numbers, faster turning, efficiency is king
Activity ratios tell you everything
[Verse 3]
Receivables turnover measures credit sales you make
Divided by accounts receivable, for analysis sake
When customers pay quickly, this ratio climbs up high
When payment terms are longer, you'll see this number fly down low
Days sales outstanding flips this ratio around
Three-sixty-five divided by turnover, wisdom found
Thirty days means customers pay fast and cash flows free
Ninety days means longer waits for your money to be
[Bridge]
Asset turnover total takes your revenue for the year
Divided by total assets, the big picture becomes clear
How well you use everything to generate your sales
When this ratio's climbing up, your efficiency never fails
Some industries are heavy with equipment, land, and more
Their asset turnover's lower but that's normal to the core
While service companies are light, their ratios run high
Compare within your industry to see who's flying by
[Chorus]
Turn it over, turn it over, that's the key to understand
Inventory turnover shows how fast you move your hand
Receivables are spinning when your customers pay fast
Asset turnover total tells you if your sales will last
Higher numbers, faster turning, efficiency is king
Activity ratios tell you everything