Efficiency (activity) ratios - Introduction
The efficiency analysis is sometimes called the management efficiency analysis or economic activity analysis. It includes the assessment of the productivity (turnover) of assets and capital used by the company. Productivity analysis is based on the ratios relating the achieved results on sales (or costs of obtaining them) to the levels of assets and capital used in the company. The group of these ratios allows to assess the efficiency of assets management, which affects both the financial liquidity and long-term profitability.
The group of efficiency (activity) ratios includes:
- Total assets turnover,
- Tangible fixed assets turnover / Productivity of tangible fixed assets,
- Intangible assets turnover ratio,
- Inventory/stock turnover ratio (in days) / Inventories cycle,
- Receivables turnover ratio (in days) / Receivables cycle,
- Trade receivables turnover ratio (in days),
- Liabilities turnover ratio (in days) / Liabilities cycle,
- Trade liabilities turnover ratio (in days),
- Operating cycle (in days),
- Cash conversion cycle (in days),
- Operating costs ratio,
- Financial costs ratio.