Equity turnover measures how much revenue each dollar of shareholders’ equity generates — a capital-efficiency ratio that asks whether the owners’ money is working hard or lounging.
The formula
Equity Turnover = Revenue ÷ Average Shareholders’ Equity
Average equity — (beginning + ending) ÷ 2 — is the honest denominator; our average shareholders’ equity calculator computes it (with ROE as a bonus).
Worked example
| Revenue | $2,600,000 |
| Equity, start / end | $800,000 / $950,000 |
| Average equity | $875,000 |
| Equity turnover | 2,600,000 ÷ 875,000 ≈ 2.97× |
Reading it
High turnover can mean efficient capital use — or heavy debt (little equity doing lots of revenue). Low turnover can mean lazy capital — or a deliberately equity-heavy, low-leverage balance sheet. That’s why equity turnover is read beside ROE and leverage: in DuPont terms, ROE = profit margin × asset turnover × leverage, and equity turnover is the compressed cousin of the last two. It’s a comparison metric — against the company’s own history and close peers — not a universal benchmark.
FAQ
What is a good equity turnover ratio? There’s no universal number — retail runs high, capital-intensive industries low. Compare against the company’s own trend and direct peers.
How is equity turnover different from asset turnover? Denominator: equity turnover uses shareholders’ equity; asset turnover uses total assets. The gap between them reflects leverage.
Does high equity turnover mean high profitability? Not necessarily — it measures revenue per equity dollar, not profit. Pair with margin and ROE for the full picture.
Why use average equity? Revenue accrues all year; equity is a snapshot. Averaging beginning and ending equity aligns the timeframes.