Question

Ratios that are calculated for measuring the efficiency of operations of business based on effective utilisation of resources are called :

• A. Activity Ratios
• B. Profitability Ratios
• C. Solvency Ratios
• D. Liquidity Ratios

Hint:

Activity Ratios are also known as efficiency or turnover ratios, focusing on the utilisation of assets and resources.

Answer 1

The Correct Option is A

Activity ratios measure how efficiently a business utilizes its assets and resources to generate revenue. These include Inventory Turnover Ratio, Debtors Turnover Ratio, etc. These ratios are helpful in evaluating the effectiveness of management’s operations and use of capital.