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Activity Ratios

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..