Definition of ‘Efficiency Ratios’
Efficiency ratios show how efficiently the resources of the business are being used to generate revenue so it is preferable for them to be as high as possible.
A low efficiency ratio could indicate inefficiencies in the assets themselves or in the management team operating them.
Template Efficiency Ratios Definition
The efficiency ratios most commonly used are listed below.
- Asset turnover ratio
- Fixed asset turnover ratio
- Working capital turnover ratio
In the financial projections template the level of efficiency is indicated by the asset turnover ratio which is defined as the ratio of revenue to assets, and is more fully discussed in our tutorial on financial projections ratios.
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