What are the key financial ratios to analyze the activity of an entity?



Q3. List of activity ratios
What are the key financial ratios that can be used to analyze the activity of an entity?

A3.
Activity ratios are calculated as follows:
(1) Assets turnover ratio
= Sales / Average total assets
(2) Inventory turnover ratio
= Cost of goods sold / Average inventory
(3) Accounts receivable turnover ratio
= Credit sales / Average accounts receivable
(4) Accounts payable turnover ratio
= Credit purchases / Average accounts payable

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