Activity Ratios

Activity Ratios

Activity ratios help in understanding how efficient is the company in utilizing the resources. It shows if the company is generating sufficient revenue from its Fixed Assets, Receivables, Inventory and working capital.

Below are the important activity ratios we will learn as part of this resources.

Click on each ratios to learn their meaning, formula along with examples, interpretation and real life application

  • Receivable Turnover ratio

    High debtor turnover ratio indicate highly efficient credit and collection. Low debtor turnover ratio would…

  • Days Sales outstanding

    High debtor days suggest problems with debt collection or the financial position of major customers. Lower debtor..

  • Inventory Turnover ratio

    Low inventory turnover ratio give us the indicattion of slow- moving inventory, perhaps due to technological…

  • Days inventory in hand

    High inventory days indicates that the company is not able to quickly turn its inventory into sales. Low inventory…

  • Payable Turnover ratio

    High payable tunover ratio indicates prompt payment being made to suppliers for credit purchases. Low payable…

  • Days payables outstanding

    Low payable days indicate that the company is not fully utilizing its cash position and may indicate an inefficient liquidity …

  • Working Capital Turnover ratio

    Low working capital turnover ratio generally signals that the company is not generating more revenue with its working capital…

  • Asset Turnover ratio

    High asset turnover ratio generally signals that the company is generating more revenue with average assets. Low asset turnover ratio..

  • Fixed assets Turnover ratio

    Low fixed asset turnover ratio indicates ineffecient or more capital- intensive business environment, or a new business not yet..


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