Money Turns ...
I dont know how many of you guys are familiar with the term "inventory turns" - Well, its a commonly used metric in Supply Chain Management - It is calculated as Annual Expenses divided by Average Inventory Level.
Its an expression of how well the company utilizes the inventory they have. For example, Company A has inventory turns of 12 and Company B has 6, this means that Company A utilizes its assets twice as well.
This got me wondering, how would one calculate the equivalent for a countries economy. I came up with a term called "Money Turns" which I defined as GDP divided by the investments in Cash, Checking & Savings accounts, CD's and other investments.
So the higher money turns are, the better the country and its enterprises are at utilizing their assets/money.
I did some basic calculations, and this is what I came up with ....
Money Turns in the US - 3.23
Money Turns in India - 1.23
THis essentially means that the US economy is 2.6 times as efficient as the Indian economy ... So, if an American citizen puts a dollar in the bank, that dollar is loaned out 3.23 times whereas the dollar in India would only be loaned out 1.23 times.
This is an indication of how much easier getting credit is in the US. Also, its an indication of the levels of Non-Performing Assets (NPAs) of banks ... NPAs are the amount of money that is just sitting with banks as cash + bad loans.
Average NPA's of Indian Banks was 13%, while in my US bank, this level was less than 1%.
Improving money turns in India would be a great way to accelerate our GDP growth .....
Its an expression of how well the company utilizes the inventory they have. For example, Company A has inventory turns of 12 and Company B has 6, this means that Company A utilizes its assets twice as well.
This got me wondering, how would one calculate the equivalent for a countries economy. I came up with a term called "Money Turns" which I defined as GDP divided by the investments in Cash, Checking & Savings accounts, CD's and other investments.
So the higher money turns are, the better the country and its enterprises are at utilizing their assets/money.
I did some basic calculations, and this is what I came up with ....
Money Turns in the US - 3.23
Money Turns in India - 1.23
THis essentially means that the US economy is 2.6 times as efficient as the Indian economy ... So, if an American citizen puts a dollar in the bank, that dollar is loaned out 3.23 times whereas the dollar in India would only be loaned out 1.23 times.
This is an indication of how much easier getting credit is in the US. Also, its an indication of the levels of Non-Performing Assets (NPAs) of banks ... NPAs are the amount of money that is just sitting with banks as cash + bad loans.
Average NPA's of Indian Banks was 13%, while in my US bank, this level was less than 1%.
Improving money turns in India would be a great way to accelerate our GDP growth .....
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