Activity ratios are handy tools that help us understand how well a company works by looking at how it uses its resources to make money. From what I've learned about financial analysis, these ratios can give us important information about different parts of a business.

Here are some key activity ratios and what they tell us:

1. Inventory Turnover Ratio:

   • This ratio tells us how many times a company sells and replaces its products over a certain time. If this number is high, it means the company is good at managing its inventory and making sales.

2. Accounts Receivable Turnover:

   • This ratio shows how well a company gets paid for its sales. A high number means the company is doing a great job at collecting money owed to it, which is good for cash flow.

3. Asset Turnover Ratio:

   • This ratio indicates how effectively a company uses its assets to make sales. A high asset turnover ratio means the company is using its resources well and running efficiently.

In short, these activity ratios help us see how well a company manages its resources. By looking closely at them, we can spot strengths and weaknesses in how the company operates. This helps us understand its overall efficiency and its chances for growth.