activity ratios

Question 1

what are activity ratios also knwon as

Answer 1

performance ratio or turnover ratio

Question 2

what does activity ratio do?

Answer 2

measures how well resources are being used by the enterprise. result is expressed in the number of times.

Question 3

what does a higher activity ratio mean?

Answer 3

better use of resources or capital which in turn means higher profitability

Question 4

what are the activity ratios?

Answer 4

inventory turover ratio
trade recivebales turonver ratio
trade payables turover ratio
working capital turonver ratio
fixed assets turover ratio
net assets turnover ratio

Question 5

what is invenrtoy turnover ratio?

Answer 5

coro (cogs)/ avg inventory
expressed in times
it establishes relaionship between cogs and avegrage inventory carried during that period
it aims to determine the efficiency with which the inventory is used. measures the efficiency of inventory management The inventory turnover ratio is a measure of how quickly a company sells its inventory, or its goods, and replaces them with new ones.

Question 6

how to find coro?

Answer 6

rfo-gp
rfo+gl
or opening inventory+ net purchases+ direct expenses-closing inventory

Question 7

what is trade recievables turnover ratio?

Answer 7

credit rfo/avg tdr
expressed in times
it shows how quickly trade reciveables are converted into cash and cash equvalents shows the efficiency in collection of the trade recievables

Question 8

how to find credit revenue from operations

Answer 8

credit sales-sales return
rfo- cash rfo

Question 9

trade payables turnover ratio

Answer 9

net credit purchases/avg trade payables
times
it means the amount to be paid for the purchase of goods and services in the ordinary course of business.
to find out the effieciency with which trade payables are managed and paid

Question 10

working capital turnover ratio

Answer 10

rfo/working cap
expressed in times
ITS done to see wether or not the working capital has been used effectively to generate revenue

Question 11

fixed assets turnover ratio

Answer 11

aka non current assets turnover ratio
rfo/fixed assets
expressed in times
it shows how well fixed assets are being used to generate revenue

Question 12

net assets turnover ratio

Answer 12

aka capital employed turnover ratio
rfo/capital
employed
The net assets turnover ratio measures how effectively a company uses all of its assets (both fixed and current) to generate revenue