Read the following information carefully and answer the next 5 questions:
| PARTICULARS | AMOUNT (₹) |
| Revenue from operations | 8,75,000 |
| Creditors | 90,000 |
| Bills Receivables | 48,000 |
| Bills Payables | 52,000 |
| Purchases | 4,20,000 |
| Trade debtors | 59,000 |
Trade receivables turnover ratio and trade payables ratio are categorised as:
Answer & explanation
Correct answer: option 3
The correct answer is option 3- Activity ratio.
Activity ratios express the number of times assets employed, or, for that matter, any constituent of assets, is turned into sales during an accounting period. Higher turnover ratio means better utilisation of assets and signifies improved efficiency and profitability, and as such are known as efficiency ratios. The important activity ratios calculated under this category are-
1. Inventory Turnover;
2. Trade receivable Turnover;
3. Trade payable Turnover;
4. Investment (Net assets) Turnover
5. Fixed assets Turnover;
6. Working capital Turnover.
7. Current assets turnover