Efficiency Ratios

Efficiency ratios measure how well a company uses its resources to generate sales and profits. They reveal how effectively a business manages its assets, inventory, or receivables to operate smoothly. For example, inventory turnover shows how many times inventory is sold and replaced over a period, highlighting resource utilization. These ratios help owners, investors, and managers assess operational performance and identify areas for improvement, ultimately supporting better decision-making for sustained growth and profitability.