CA Intermediate · Financial Management and Strategic Management · Financial Analysis and Planning - Ratio Analysis
Which of the following ratios is classified as an activity (turnover) ratio?
Debtors turnover ratio is an activity ratio because it shows how efficiently a firm collects its receivables by relating credit sales to average debtors. The other options are leverage, coverage and profitability measures, not measures of asset utilisation efficiency.
- ADebt-equity ratio
- BDebtors turnover ratioCorrect
- CInterest coverage ratio
- DNet profit margin
Explanation
Activity ratios measure how efficiently assets are used, e.g. debtors turnover, stock turnover. Debt-equity and interest coverage are leverage/coverage ratios, and net profit margin is a profitability ratio.
Did you get it right without looking?
One question tells you little. A timed set on Financial Analysis and Planning - Ratio Analysis shows your real accuracy, how long you take and where you lose marks.
More Financial Analysis and Planning - Ratio Analysis questions
- Which of the following ratios is calculated as (Cost of goods sold ÷ Average inventory)?
- Aarav Ltd has current assets of Rs 6,00,000, inventory of Rs 1,80,000, prepaid expenses of Rs 20,000 and a current ratio of 2:1. What is its…
- Meera Textiles has a current ratio of 2.5:1 and a quick ratio of 1.5:1. Its current liabilities are ₹4,00,000. There are no prepaid expenses…
- Verma Industries has a net profit margin of 5%, total asset turnover of 2 times and an equity multiplier of 3. Total assets are ₹50,00,000. …
- Which of the following ratios is calculated as (Net Profit after tax + Interest on long-term debt × (1 − t)) ÷ Capital Employed, and is ther…
- Which of the following statements about the proprietary ratio is correct?