Activity Ratios

Activity ratio / Performance ratio

$$\text{Total Asset Turnover Ratio}=\frac{\text{Sales or “Cost of Goods sold”}}{\text{Total assets}}$$ $$\text{Fixed Assets Turnover Ratio}=\frac{\text{Sales or “Cost of goods sold”}}{\text{Fixed assets}}$$

• Make interperiod comparision for the same company
• Compare with industry average
• Compare with top companies
• Set the best performing company as the benchmark

$$\text{Capital turnoever ratio}=\frac{\text{Sales / Cost of goods sold}}{\text{Current assets}}$$ $$\text{Current assets turnoever ratio}=\frac{\text{Sales / Cost of goods sold}}{\text{ Working capital}}$$ $$\text{Working capital turnoever ratio}=\frac{\text{Sales / Cost of goods sold}}{\text{Working capital}}$$ $$\text{Inventory turnover ratio}=\frac{\text{Cost of goods sold / Sales}}{\text{Average Inventory}}$$

Where average inventory is $\frac{\text{Opening stock + Closing stock}}{2}$.

$$\text{Raw Material Inventory Turnover Ratio}=\frac{\text{Raw material consumed}}{\text{Average raw material ink}}$$ $$\text{ Days Inventory held}=\frac{365}{\text{Inventory turnoever ratio}}\text{days}=\frac{12}{\text{Inventory turnover ratio}}\text{months}$$

Receivables (Debtors) Velocity/Average Collection Period:

$$=\frac{\text{Average Accounts Receivables}}{\text{Average daily credit sales}}=\frac{\text{12 months/52 weeks/360 days}}{\text{Receivable Turnover Ratio}}$$