Member-only story
How to Harness Efficiency Ratios to Boost Business Performance
Have you tested your company’s success with an efficiency ratio (or multiple efficiency ratios)? “How successful is your business?” might sound like a straightforward question, but there is a boatload of different metrics you can use to quantify how successful (or unsuccessful) a given business is.
When you need to take a close look at a given business’s performance, it’s essential to know how to take large amounts of financial data and boil it down to insights you can act on. One of the best ways to do this is to use efficiency ratios. Here’s our full guide to efficiency ratios, showing you how you can best use them to improve your business’s profitability and success.
What Is an Efficiency Ratio?
Efficiency ratios measure a company’s ability to use its resources to make a profit or maximize its operations. There are multiple s14,000pecific efficiency ratios that are used to gauge and track various important financial metrics. Depending on the types of insights you need, you can calculate an inventory turnover ratio, accounts payable turnover, asset turnover ratio, and more.
Here’s how to calculate the most important efficiency ratios that you should be using.
