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Q.4. Classify the various Turnover/Activity/Performance Ratios. Also explain the meaning, method of calculation and objective of these ratios.

Answer:

Classification of Turnover/Activity/Performance Ratios: -

1. Capital Turnover Ratio
2. Fixed Assets Turnover Ratio (CBSE 1998, 2000, Outside Delhi 2001)
3. Working Capital Turnover Ratio (CBSE Outside Delhi 2001)
4. Stock Turnover Ratio (CBSE 1989, 2000, Outside Delhi 2001)
5. Debtors Turnover Ratio (CBSE Outside Delhi 2001, Delhi 2002)
6. Debt Collection Period

Meaning, Objective and Method of Calculation: -

1. Capital Turnover Ratio: Capital turnover ratio establishes a relationship between net sales and capital employed. The ratio indicates the times by which the capital employed is used to generate sales. It is calculated as follows: -

Capital Turnover Ratio = Net Sales/Capital Employed

Where Net Sales = Sales – Sales Return

Capital Employed = Share Capital......

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Approximate Word Count: 1929
Approximate Pages: 8 (250 words per double-spaced page)

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