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. Commonly referred to as efficiency ratios, activity ratios help analysts gauge how a company handles inventory management, which is key to its operational fluidity and overall fiscal health. Activity Ratio = Capacity Ratio x Efficiency RatioEfficiency Ratio = Activity Ratio / Capacity Ratio? Efficiency Ratio = 80 / 120? Efficiency Ratio = 66. 67%Thus, option 4 is the correct answer.