Commonly Used Terms
How quickly a business can turn its assets into cash or sale is a good indicator of how well that business is being run. Activity Ratio measures how effectively a business uses its assets. It is commonly referred to as efficiency ratios; activity ratios are a fine indicator of how a company handles its inventory management.
Management and accounting departments use multiple Activity Ratios to gauge the efficiency of their businesses. These Activity Ratios are as follows:
- Total Assets Turnover Ratio
- Fixed Assets Turnover Ratio
- Inventory Turnover Ratio
- Accounts Receivable Turnover Ratio
- Working Capital Ratio
How to calculate activity ratio?
- Total Assets Turnover Ratio : This ratio measures how fast a company turns its assets into revenue. It measures the efficiency with which a business uses its assets to generate sales.
Total Assets Turnover Ratio = Sales / Average Total Assets
- Fixed Assets Turnover Ratio: This ratio measures the ability of the business to generate sales from Fixed assets such as property, plant, and equipment.
Fixed Assets Turnover Ratio = Net Sales/ (Total Fixed Assets - Depreciation)
- Inventory Turnover Ratio: Reveals the number of times a company created its inventory and sold it over a certain period of time. It denotes the efficiency with which the inventory is managed.
Inventory Turnover Ratio = Costs of Goods Sold/ Average cost of Inventory.
- Accounts Receivable Turnover Ratio : It depicts how efficiently a business provides credit to its customers and collects debts. To measure this ratio, only the credit sales are taken into account and not the cash sales.
Accounts Receivable Turnover Ratio = Net Credit Sales/ Average Accounts Receivable
It is a good sign when the accounts receivables turnover ratio is high since the debts are being paid on time.
- Working Capital Ratio : Working capital is current assets less current liabilities. The ratio helps the business figure out the net annual sales generated by the average amount of working capital for a year.
Working Capital Ratio = Net sales/ Average Working Capital.
Average Payment Period (for materials)
Average Cost per Unit
Available to Sell (ATS)
Available to Promise (ATP)
Automated Storage-Retrieval System (AS-RS)
Automated Manifest System (AMS)
Automated Guiding Vehicle System (AGVS)
Automated Commercial Environment (ACE)
Automated Clearing House (ACH)
Automated Call Distribution
Automated Broker Interface (ABI)
Association of American Railroads
Approved Vendor List (AVL)
Any Quantity Rate (AQ)
Anticipated Delay Report
American Waterways Operators
American Trucking Association (ATA)
American Standard Code for Information Interchange
American Society of Transportation & Logistics
American Society for Training and Development (ASTD)
American Society for Testing and Materials (ASTM)
American Society for Quality (ASQ)
American National Standards Institute (ANSI)
American Customer Satisfaction Index (ACSI)
All Cargo Carrier
Airport and Airway Trust Fund
Airline Terminal Fee (ATF)
Air Transport Association of America
Air Cargo Containers
Aggregate Tender Rate
Aggregate Inventory Management
After Sale Service
Advanced Shipping Notice
Advanced Planning and Scheduling (APS)
Advance Material Request
Actual to Theoretical Cycle Time
Actual Cost System
Activity Network Diagram
Activity Based Planning (ABP)
Activity Based Management (ABM)
Activity Based Costing System
Activity Based Costing Model
Activity Based Costing (ABC)
Activity Based Budgeting (ABB)
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