This document discusses various activity and efficiency ratios used to measure the operational performance of a business. It defines stock turnover ratio, debtors turnover ratio, creditors turnover ratio, and working capital turnover ratio. For stock turnover ratio, it provides the calculation and explains that a higher ratio indicates more efficient inventory management. It also defines inventory conversion period and average collection period as metrics related to stock and debtors turnover ratios.

1. Dr. Mohamed Kutty Kakkakunnan
Associate Professor
P G Dept. of Commerce
N A M College Kallikkandy
Kannur – Kerala - India

2. Activity / Efficiency / Turnover Ratios
 Ratios calculated to ascertain the efficiency with
the operations of an enterprise is carried on
 Shows the efficiency in the utilization of various
resources
 Shows the speed or briskness or velocity in
operations
 Shows the managerial efficiency
 Generally calculated for items in current assets

3. 1. Stock Turnover Ratio /Velocity
2. Debtors / Receivables Turnover Ratio
3. Creditors /Payables Turnover Ratio
4. Working Capital Turnover Ratio

4. Stock (Inventory) Turnover Ratio / Velocity
• Shows the relationship between Cost of Goods Sold (or
Sales) and Average Inventory
• Shows the speed or briskness of converting stock
• Higher – better (Expressed in times)
• Efficiency in the management of inventory
Inventory Conversion Period
Shows the time required for clearing stock (shorter – better)

5. Debtors or Receivables Turnover / Velocity
Average collection period
Period required for receiving amounts due from debtors /
receivables

6. Creditors /payables turnover or velocity
Working capital turnover ratio