Activity Ratio

ACTIVITY RATIO : To measure efficiency of a company perform its daily main operations.

Examples of Activity Ratio

  1) INVENTORY TURNOVER
INVENTORY TURNOVER = COST OF GOODS SOLD / AVERAGE INVENTORY 
To measure how fast inventory being cleared compared to cost of goods sold.

   

  2) DAYS OF INVENTORY ON HAND
DAYS OF INVENTORY ON HAND = 365 / INVENTORY TURNOVER 
To measure how many days need to clear inventory.

  3)  RECEIVABLES TURNOVER
RECEIVABLES TURNOVER = REVENUE / AVERAGE RECEIVABLES 
To measure how fast to receive money from customers compared to revenue.

  4)  DAYS OF SALES OUTSTANDING
DAYS OF SALES OUTSTANDING = 365 / RECEIVABLES TURNOVER 
To measure how many days need to receive cash from customers.

  5) PAYABLE TURNOVER
PAYABLE TURNOVER = PURCHASES / AVERAGE TRADE PAYABLE 
To measure how fast company pays money to suppliers.

  6) NUMBER OF DAYS OF PAYABLE 
NUMBER OF DAYS OF PAYABLE = 365 / PAYABLE TURNOVER 
To measure how many days company pays money to supplier.

  7)  WORKING CAPITAL TURNOVER
WORKING CAPITAL TURNOVER = REVENUE / AVERAGE WORKING CAPITAL 
To measure how efficient company use working capital to generate revenue.

  8)  TOTAL ASSETS TURNOVER
TOTAL ASSETS TURNOVER = REVENUE / AVERAGE TOTAL ASSETS 
To measure how efficient company use total assets to generate revenue.

Further Info: 
"LIQUIDITY RATIO"
"SOLVENCY RATIO"
"PROFITABILITY RATIO"
"VALUATION RATIO"