Activity Ratios Provide brief definition of what Activity ratios mean to the profitability of a company. What are the differences between Apple and Samsung in relationship to the ratios? See attached for ratios Total Asset Turnover Inventory Turnover Fixed Asset turnover Receivable Turnover 3. What does it mean to the company’s profitability? Is it good or bad?
Activity Ratios
- Provide brief definition of what Activity ratios mean to the profitability of a company.
- What are the differences between Apple and Samsung in relationship to the ratios?
See attached for ratios
- Total Asset Turnover
- Inventory Turnover
- Fixed Asset turnover
- Receivable Turnover
3. What does it mean to the company’s profitability? Is it good or bad?
Activity Ratio:-Activity ratio is the measure that indicates how efficiently a company is utilizing its assets in its operations to generate revenue income for it. Activity Ratio is of different types such as:-
- Total Assets Turnover: It is a ratio that helps investors in deciding how efficiently a company is utilizing its assets in generating sales during the period. The formula for the same is:-
- Inventory Turnover:-This ratio shows the number of times inventory produced during the year sold and used by the company. The formula7y for the same is:-
- Fixed Assets Turnover:-It is a ratio that helps investors in deciding how efficiently a company is utilizing its fixed assets in generating sales during the period. The formula for the same is:-
- Receivables Turnover: It shows the efficiency of the company in collecting the debts from its receivables during the period of time. The formula is:-
Activity Ratio is the measure that helps investors in analyzing the company's efficiency in generating profit or revenue. Hence, this ratio is very helpful in measuring the profitability of the company during the period of time.
Activity ratio indicates how efficiently the company is working which means how efficiently a company is using its assets in generating revenue to achieve organizational goals.
This ratio is useful in comparison of one year to another and from one company to another.
For more profitability analysis, the company uses the "Profitability ratio" which helps in better analyzing profit earning.
Step by step
Solved in 4 steps
