I consider the efficiency ratios to be the ratios also known as asset turnover ratios, activity ratios, or asset management ratios.

These efficiency ratios include 1) accounts receivable turnover ratio, and the related ratio days’ credit sales in accounts receivable; 2) inventory turnover, and the related ratio days’ cost of sales in inventory; 3) total asset turnover; and 4) fixed asset turnover.

The accounts receivable turnover ratio and the inventory turnover ratio are also used in the context of a firm’s liquidity.

The total asset turnover and fixed asset turnover are indicators of a company’s effectiveness in utilizing its assets.

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About the Author: Harold Averkamp (CPA) has worked as an accountant, consultant, and university accounting instructor for more than 25 years.

He is the creator of the AccountingCoach Pro which has been praised for its ability to simplify accounting in a way that anybody can understand.

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