As I mentioned before, efficiency (‘activity’) ratios measure
the efficiency of the firm's use of resources (in terms of converting these
resources to cash, of course). Efficiency ratios are used to measure the
relative efficiency of a firm based on its use of its assets, leverage or other
such balance sheet items. These ratios are important in determining whether a
company's management is doing a good enough job of generating revenues, cash,
etc. from its resources.
There are many activity ratios, but the most widely used are
eight of them: Receivables Turnover, Average Collection Period, Inventory Turnover, Inventory Conversion Period, Total
Assets Turnover, Stock Turnover, Degree of Operating Leverage and Days Sales Outstanding.
No comments:
Post a Comment