Activity Ratios: Measures how effectively Co. uses Assets

Question 1

Rec. Turnover

Answer 1

Net credit sales / Avg Trade Receivables

Measures liquidity of receivables

Question 2

Inv. Turnover

Answer 2

COGS/ Avg Inventory

Measures liquidity of Inv.

Question 3

Asset Turnover

Answer 3

Net sales / Avg Total Assets

Measures how efficiently assets are used to generate sales

Question 4

Number of days’ supply in avg Inventory

Answer 4

=360 / Inventory Turnover or
=Avg (end) inventory / avg daily COGS

Measures number of days required to sell inventory

Question 5

Number of day’s sales in avg rec

Answer 5

= 360 / Rec Turnover

Measures number of days required to collect receivables