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GATE 2021 CH – Question 23

Plant Design and Economics · Process economics and cost estimation · 1 mark · Multiple choice

Turnover ratio is defined as

  1. $\frac{\text{Fixed capital investment}}{\text{Gross annual sales}}$
  2. $\frac{\text{Gross annual sales}}{\text{Fixed capital investment}}$
  3. $\frac{\text{Fixed capital investment}}{\text{Average selling price of the product}}$
  4. $\frac{\text{Gross annual sales}}{\text{Average selling price of the product}}$

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Correct answer: (B) $\frac{\text{Gross annual sales}}{\text{Fixed capital investment}}$

Explanation

The turnover ratio measures the sales generated per unit of fixed capital invested:
$$\text{Turnover ratio}=\frac{\text{Gross annual sales}}{\text{Fixed capital investment}}.$$

A is the reciprocal. C and D divide monetary totals by a unit selling price and do not measure sales relative to invested fixed capital. **Answer: B.**