Activity ratios measure how efficiently a company utilizes its assets to generate sales or revenue. They are crucial for analyzing a company's operational efficiency and are often used to compare companies within the same industry.
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Inventory Turnover Ratio: This measures how quickly a company sells its inventory within a specific period, indicating inventory management efficiency.
Accounts Receivable Turnover Ratio: This ratio shows how effectively a company collects on its outstanding credit accounts, reflecting the efficiency of its credit policies and collection efforts.
Asset Turnover Ratio: This measures the value of a company's sales or revenues generated relative to the value of its assets, indicating how effectively the company is using its assets to produce revenue