Understanding Activity Ratios: Efficiency and Performance Ratios Explained

The video tutorial covers activity ratios, also known as efficiency or performance ratios, which measure how effectively a business uses its resources to generate revenue. It explains various types of activity ratios, including total assets turnover, fixed assets turnover, net assets turnover, current assets turnover, and working capital turnover ratios. Each ratio is discussed with examples, highlighting their importance in assessing a company's efficiency and performance. The tutorial emphasizes comparing these ratios within the same industry for accurate analysis.

What are activity ratios and why are they important in business?

How is the total assets turnover ratio calculated?

How can comparing activity ratios across companies in the same industry be beneficial?

What does a higher fixed assets turnover ratio indicate?

Explain the significance of the net assets turnover ratio.

What is the formula for calculating the current assets turnover ratio?

Describe the working capital turnover ratio and its implications for a business.