Efficiency Ratio

• Is the organisation making the best use of resources?
• Return on Equity Employed:

  Profit for the Year/Opening Equity x 100
• Return on Equity Employed:

  Purpose:

  To measure the percentage return on the equity invested in the business.
• Return on Equity Employed:

  How to improve it:

  • An increase profit for the year will improve the ratio.
• Rate of Inventory Turnover:

  Cost of Sales/Average Inventory = ? Times
• Rate of Inventory Turnover:

  Purpose:

  To measure the number of times that inventory held by the company is turned over in a year.
• Rate of Inventory Turnover:

  How to improve it:

  • Have an effective inventory (stock) control system.