Practicing Success
Read the following information carefully and answer the next 5 questions:
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Trade receivables turnover ratio and trade payables ratio are categorised as: |
Liquidity ratio Solvency ratio Activity ratio Profitability ratio |
Activity ratio |
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- |