Learn With ETMarkets: A complete investor guide on efficiency ratios

Efficiency ratios are key for investors to analyse a company’s overall efficiency and understand how efficiently a company uses its resources to generate revenue. Efficiency ratios, including inventory turnover ratio, asset turnover ratio and accounts receivable turnover ratio, offer insights into different aspects of a company’s efficiency. A high inventory and asset turnover ratio indicate efficient management and strong product demand while a higher accounts receivable turnover ratio indicates that the company can collect payments more quickly. It is important to compare a company’s efficiency ratios with its peers in the same industry to make informed investment decisions.