Activity ratios or efficiency ratios are used to measure the ability of a business to convert different balance sheet accounts such as inventory, accounts receivable, and accounts payable into cash or revenue, and the managements ability to control the resources of the business.
This activity ratios calculator will help you to estimate three of the main activity ratios used in business. These ratios, which are listed below, can be used in the Financial Projections Template.
The ratios are as follows.
- Accounts receivable days – How many days sales are outstanding to customers.
- Inventory days – How many days cost of sales are held in inventory
- Accounts payable days – How many days cost of sales and overheads are owed to suppliers
The Excel sheet is available for download below. The calculator helps a business calculate the 3 ratios by entering values for revenue, gross margin, overheads, accounts receivable, inventory, and accounts payable.
Revenue, gross margin % and overheads can be obtained from the income statement of the business. In contrast, accounts receivable, accounts payable and inventory are shown on the balance sheet of the business.
Activity Ratios Calculator Download
The activity ratios calculator is available for download in Excel format by following the link below.
Summary
In conclusion activity ratios, also known as efficiency ratios, measure how effectively a business utilizes its assets and resources to generate revenue. Consequently these ratios provide insight into a operational efficiency of the business and help investors evaluate a business’s ability to manage its assets.
Users use this accounting template at their own risk. We make no warranty or representation as to its accuracy. Additionally we are covered by the terms of our legal disclaimer, which you are deemed to have read. Furthermore this is an example of an accounting format that you might use. It is purely illustrative. This is not intended to reflect general standards or targets for any particular company or sector. If you do spot a mistake in the template, please let us know and we will try to fix it.
About the Author
Chartered accountant Michael Brown is the founder and CEO of Plan Projections. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.