GENERAL KNOWLEDGE

Detailed explanation-1: -Stock turnover ratio indicates how efficiently the firm’s investment in inventories is converted to sales and thus depicts the inventory management skills of the organization. It is considered an activity ratio as it measures the efficiency of the company in using its resources.

Detailed explanation-2: -Activity ratios are useful for comparing how a company’s performance is trending over time in a horizontal statement analysis or how a company’s performance fares against its peers in comparable company analysis. They are also known as turnover ratios or operating efficiency ratios.

Detailed explanation-3: -Inventory turnover is a financial ratio showing how many times a company turned over its inventory relative to its cost of goods sold (COGS) in a given period.

Detailed explanation-4: -Yes. Inventory Turnover Ratio is an activity ratio.

Detailed explanation-5: -An activity ratio is a type of financial metric that indicates how efficiently a company is leveraging the assets on its balance sheet, to generate revenues and cash.