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Dr. Mohamed Kutty Kakkakunnan
Associate Professor
P G Dept. of Commerce
N A M College Kallikkandy
Kannur – Kerala - India
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
1. Stock Turnover Ratio /Velocity
2. Debtors / Receivables Turnover Ratio
3. Creditors /Payables Turnover Ratio
4. Working Capital Turnover Ratio
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)
Debtors or Receivables Turnover / Velocity
Average collection period
Period required for receiving amounts due from debtors /
receivables
Creditors /payables turnover or velocity
Working capital turnover ratio

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Activity 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