Activity ratios measure how well a company converts its resources to profits.

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Activity ratios, also known as turnover ratios, evaluate how efficiently a company uses its assets to generate sales and revenue. They typically include metrics such as inventory turnover, accounts receivable turnover, and fixed asset turnover. By measuring the relationship between sales or revenue and specific assets, these ratios provide insight into a company's operational efficiency and overall profitability.

Activity Ratios Measure How Well a Company Converts Its Resources