Activity ratios, also known as efficiency ratios, are financial metrics that assess how effectively a company is managing its assets to generate revenue. These ratios provide insights into the efficiency of different aspects of a company's operations. Here are some common activity ratios:

Inventory Turnover Ratio:

• Formula: Inventory Turnover=Cost of Goods SoldAverage InventoryInventory Turnover=Average InventoryCost of Goods Sold​
• Measures how quickly a company sells its inventory during a specific period. A higher ratio indicates efficient inventory management.

Accounts Receivable Turnover Ratio:

• Formula: Accounts Receivable Turnover=Net Credit SalesAverage Accounts ReceivableAccounts Receivable Turnover=Average Accounts ReceivableNet Credit Sales​
• Assesses how efficiently a company collects payments from its customers. A higher ratio suggests effective management of receivables.

Accounts Payable Turnover Ratio:

• Formula: Accounts Payable Turnover=PurchasesAverage Accounts PayableAccounts Payable Turnover=Average Accounts PayablePurchases​
• Examines how quickly a company pays its suppliers. A higher ratio may indicate a shorter payment period.

Asset Turnover Ratio:

• Formula: Asset Turnover=Net SalesAverage Total AssetsAsset Turnover=Average Total AssetsNet Sales​