DEFINITION of 'Efficiency Ratio'
Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios can calculate the turnover of receivables, the repayment of liabilities, the quantity and usage of equity and the general use of inventory and machinery.
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BREAKING DOWN 'Efficiency Ratio'
Some common ratios are accounts receivable turnover, fixed asset turnover, sales to inventory, sales to net working capital, accounts payable to sales and stock turnover ratio. These ratios are meaningful when compared to peers in the same industry and can identify business that are better managed relative to the others. Also, efficiency ratios are important because an improvement in the ratios usually translate to improved profitability.

Receivables Turnover Ratio
An accounting measure used to quantify a firm's effectiveness ... 
Net Operating Income  NOI
A company's operating income after operating expenses are deducted, ... 
Expense
1. The economic costs that a business incurs through its operations ... 
Net Income  NI
1. A company's total earnings (or profit). Net income is calculated ... 
Operating Expense
A category of expenditure that a business incurs as a result ... 
Overhead
An accounting term that refers to all ongoing business expenses ...

Fundamental Analysis
Efficiency Ratio
There are many types of efficiency ratios, but all measure how well a company utilizes its resources to make a profit. Business managers use these ratios to determine how well they are operating ... 
Insurance
Working Capital Works
A company's efficiency, financial strength and cashflow health show in its management of working capital. 
Fundamental Analysis
Measuring Company Efficiency
Three useful indicators for measuring a retail company's efficiency are its inventory turnaround times, its receivables and its collection period. 
Fundamental Analysis
Spotting Profitability With ROCE
This straightforward ratio measures whether a company is efficient, moneymaking or neither. 
Economics
Calculating Days Working Capital
A company’s days working capital ratio shows how many days it takes to convert working capital into revenue. 
Investing
What is EBITA?
EBITA measures a company’s full profitability before reducing it by interest, taxes and amortization considerations, and so is useful for calculating a company’s internal efficiency or profitability ... 
Term
What Is Financial Performance?
Financial performance measures a firm’s ability to generate profits through the use of its assets. 
Investing
How to Effectively Monitor Your Stock Holdings
Investors should concentrate on the business, not the stock price. 
Economics
Understanding Explicit Costs
Common examples of explicit costs include wages, utilities, rent, raw materials, and other direct expenses companies pay to conduct business. 
Stock Analysis
These S&P 500 Companies Hold the Most Cash
Large cash positions allow for many different options and here's why they are beneficial to shareholders.

What metrics can be used to evaluate companies in the wholesale sector?
The largest wholesale distribution industries include motor parts, commercial equipment, electronics, petroleum products, ... Read Full Answer >> 
How do I use ratios to perform a financial analysis?
Ratios are important tools used in fundamental analysis and valuation. Some measure operating performance based on data from ... Read Full Answer >> 
What do efficiency ratios measure?
Efficiency ratios measure a company's ability to use its assets and manage its liabilities effectively. Some efficiency ratios ... Read Full Answer >> 
Which financial ratios are considered to be efficiency ratios?
Efficiency ratios generally measure a company's ability to use its assets and liabilities to generate revenues or profits. ... Read Full Answer >> 
Is the bottom line the best representation of a company's financial strength?
A company's bottom line, also referred to as net income, is an important indicator of operational condition and can be used ... Read Full Answer >> 
What are some examples of efficiency ratios used in measuring businesses?
Efficiency ratios determine how productively a company manages its assets and liabilities to maximize profits. Shareholders ... Read Full Answer >> 
What sorts of factors increase cash flow from operating activities?
Cash flow from operating activities is calculated by adding net income, total noncash expenses and net change in working ... Read Full Answer >> 
What is the difference between efficiency ratios and profitability ratios?
Efficiency ratios and profitability ratios are tools used in fundamental analysis. These ratios help investors with their ... Read Full Answer >> 
Why do shareholders need financial statements?
Shareholders need financial statements to evaluate their equity investments and help them make informed decisions as to how ... Read Full Answer >>