A measure used to determine how well a company uses its assets and liabilities internally. Efficiency ratios can calculate a number of measures from turnover of receivables to the quantity and usage of equity. These ratios are useful when compared to the same figures in similar corporations in order to identify what businesses are better run, and target management improvements.
This can help investors to determine if the present management team is performing at an acceptable level compared to the industry. Also, it can help when looking to make an investment in a company.