Activity Ratio
The funds of creditors and owners are invested in various asset to generate sales and profit. Activity ratio are employed to evaluate the efficiency with which the firm manages and utilize its assets. This ratio are also called turnover ratio because they indicate the speed with which assets are being converted or turned over into sales. Activity ratio thus involved a relationship between sales and assets generally reflects that assts are managed well several activity ratio’s can be calculated to judge the effectiveness of assets utilization.
The important turnover or activity ratios are:
- Inventory turnover ratio.
- Debtors turnover ratio.
- Total assets turnover ratio.
- Fixed assets turnover ratio.
- Working Capital turnover ratio.
- Net current assets turnover ratio.
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