Financial Ratio on Assessing The ACTIVITY Of Assets Utilised

Continued from my last article, we will now look at the financial ratio for assessing the activity of assets deployed by the company. Essentially, the activity ratios measure the efficiency of managing or using of assets like

  • total assets,
  • accounts receivable,
  • inventory, and
  • accounts payable.

Ratio TOTAL ASSETS TURNOVER
Formula Net Sales
Total Assets (or average) or Accounts Receivable, Inventory
Use Measure the efficiency of the usage of total assets in generating sales.
Values Varies.
The higher is the more effective
Interpretation Comparing similar periods and similar industry statistics determines measures of efficiencies by which the assets are employed in the business.

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