The basic accounting equation brings the balance to the balance sheet.  Essentially it depicts where the funding for assets came from.

Assets = Liabilities + Equity

For example, a new homeowner buys a house for $100,000.  $10,000 is paid with cash (equity) and $90,000 is a loan from the bank (liabilities).  $100,000house = $10,000cash + $90,000loan.

The equation can be expanded by breaking down equity into contributed capital (owner’s equity) and revenue.

Sorry, this turnover isn’t apple turnover.  Turnover in this case measures the amount of dollars of sales that result from the amount of the average operating assets.  This is a useful measure to observe as it shows how efficiently assets are being used to generate sales dollars.  Increasing the turnover ratio is what many firms will attempt to do to maximize profits, and investors will look for businesses with higher turnover ratios.

The turnover ratio is calculated as follows:

Turnover = Sales / Average operatng assets