The correct answer is option 3- Activity Ratio.
The stock turnover ratio comes under the activity category of ratio.
Activity (or Turnover) Ratio: These ratios indicate the speed at which, activities of the business are being performed. The 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. A higher turnover ratio means better utilization 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
OTHER OPTIONS-
- Liquidity Ratio- These ratios gauge a company's ability to meet its short-term financial obligations promptly. Liquidity ratios are calculated to measure the short-term solvency of the business, i.e. the firm’s ability to meet its current obligations. These are analyzed by looking at the amounts of current assets and current liabilities in the balance sheet. Two common liquidity ratios are the current ratio and the acid-test ratio or quick ratio.
- Solvency ratio- Solvency ratios focus on assessing a business's capability to fulfill its long-term debt obligations rather than short-term ones. Solvency ratios are calculated to determine the ability of the business to service its debt in the long run. Examples of solvency ratios include the debt-equity ratio, total assets-to-debt ratio, proprietary ratio, and interest coverage ratio.
- Profitability Ratio- Profitability ratios delve into a company's capacity to generate earnings based on the utilization of its resources. Prominent profitability ratios include the Gross Profit ratio, Operating ratio, Net Profit Ratio, Return on Investment (ROI) or Capital Employed, Earnings per Share (EPS), Book Value per Share, Dividend per Share, and Price/Earnings (P/E) ratio.
|
