Efficiency ratios
Submitted by members on Mon, 08/24/2015 - 03:10In addition to understanding profitability the other key aspect of overall organizational performance is the efficient use of resources and assets. The asset turnover or asset utilization contributes to overall performance (measured by Return on capital employed (ROCE)) in combination with net profit/income ratio (see Profitability ratios). Asset turnover or asset utilization ratio is therefore a key measure of effectiveness, it relates the assets employed in the business to the income or sales revenues generated from the use of those assets.