Asked by Jessica Johnson on Jun 22, 2024
Verified
Activity ratios describe the profitability of a company.
Activity Ratios
Financial metrics that measure how efficiently a company utilizes its assets to generate sales or revenue.
Profitability
The ability of a business to earn a profit, determined by its revenue exceeding its costs and expenses over a specific period.
- Examine diverse business tactics via the economic variances manifested in the use of assets and profit generation.
Verified Answer
RS
Ruthson SeideJun 23, 2024
Final Answer :
False
Explanation :
Activity ratios, also known as efficiency ratios, measure how effectively a company is utilizing its assets and resources, such as inventory and accounts receivable. They do not directly describe the profitability of a company, but rather its operational efficiency. Profitability ratios, such as return on investment and net profit margin, are used to measure a company's profitability.
Learning Objectives
- Examine diverse business tactics via the economic variances manifested in the use of assets and profit generation.