## Activity / Efficiency / Turnover Ratios
Also called asset management ratios — they evaluate how efficiently the firm manages and utilises its assets to generate sales. They show the frequency of sales relative to assets (capital assets, working capital, or average inventory), are based on sales / cost of goods sold, and are expressed as a rate or number of times.
The turnover ratios:
- (a) Total Assets Turnover Ratio
- (b) Fixed Assets Turnover Ratio
- (c) Capital Turnover / Net Assets Turnover Ratio
- (d) Current Assets Turnover Ratio
- (e) Working Capital Turnover Ratio, which includes:
- (i) Inventory / Stock Turnover Ratio
- (ii) Receivables (Debtors) Turnover Ratio
- (iii) Payables (Creditors) Turnover Ratio
### A. Total Asset Turnover Ratio
$$= \frac{\text{Sales / Cost of Goods Sold}}{\text{Total Assets}}$$
- Higher is better — efficient use of total assets to generate sales; a low ratio signals under-utilised assets.
### B. Fixed Assets Turnover Ratio
$$= \frac{\text{Sales / Cost of Goods Sold}}{\text{Net Fixed Assets}}$$
- Measures efficiency of fixed-asset usage; a high ratio indicates efficient utilisation of fixed assets in generating sales.
> General rule for turnover ratios: higher = more efficient. Keep the numerator (Sales vs COGS) consistent with how the question frames the rest of the analysis.