What is capacity turnover?

Capacity turnover is a measure of how effectively a company utilizes its production capacity to generate sales. It is calculated by dividing total revenue or sales by the total capacity available for production during a specific period. A higher capacity turnover ratio indicates that a company is efficiently using its resources to maximize output and sales, while a lower ratio may suggest underutilization of capacity. This metric is important for assessing operational efficiency and optimizing resource allocation.