Activity ratios are used to measure the relative efficiency of a firm based on its use of its assets, leverage or other such balance sheet items. Accounting ratios that measure a firm's ability to convert different accounts within its balance sheets into cash or sales.
The cash ratio is the ratio of a company's total cash and cash equivalents to its current liabilities. The metric calculates a company's ability to repay its short-term debt; this information is useful to creditors when deciding how much debt, if any, they would be willing to extend to the asking party.
What is the 'Current Ratio' The current ratio is a liquidity ratio that measures a company's ability to pay short-term and long-term obligations. To gauge this ability, the current ratio considers the current total assets of a company (both liquid and illiquid) relative to that company’s current total liabilities.
The fixed-asset turnover ratio is a ratio which measures a company's ability to generate net sales from fixed-asset investments. The fixed-asset turnover ratio is a ratio which measures a company's ability to generate net sales from fixed-asset investments.
Liquidity ratios are most useful when they are used in comparative form. This analysis may be performed internally or externally. For example, internal analysis regarding liquidity ratios involves utilizing multiple accounting periods that are reported using the same accounting methods.
The quick ratio is a liquidity ratio that measures a company's ability, using its quick assets, to pay off its current debt as they come due. The ratio derives its name presumably from the fact that assets such as cash and marketable securities are quick sources of cash.
Asset turnover ratio measures the value of a company’s sales or revenues generated relative to the value of its assets. The Asset Turnover ratio can often be used as an indicator of the efficiency with which a company is deploying its assets in generating revenue.