Efficiency ratios are used to measure the quality of
the company's receivables and how efficiently it uses
its other assets.
The collection period shows the number of days it takes for a
business to turn its accounts receivable into cash.  Should be
considered in conjunction with the terms of sale that a company
or industry typically allows.

Accounts Receivable         x 365 = Collection Period in Days
Sales to inventory ratio shows the number of "turns" in
inventory.  If the ratio is very high, it may indicate that
the business is losing sales to competitors because they
are understocked or customers are buying elsewhere.  If
the ratio is too low, this may show that the inventories
are stagnant.

Annual Net Sales
Assets to sales measures the percentage of investment
in assets that is needed to generate the annual sales
level.  If the percentage is very high, it probably
indicates that a business is not being aggressive in its
sales efforts.  If the ratio is low, it usually means that the
business is putting a strain on its existing assets.

Total Assets
Net Sales
Sales to net working capital measures the number of
times working capital turns over annually in relation to
net sales.  A high turnover rate can indicate an
excessive sales volume in relation to the investment in
the business.  A high turnover rate might also indicate
that the business relies extensively upon credit granted
by suppliers or banks as a substitute for an adequate
margin of operating funds.

Net Sales
Net Working Capital
The accounts payable to sales ratio measures how the
company pays its suppliers in relation to the sales
volume being transacted.  A low percentage would
indicate a healthy ratio with all bills be paid in a timely

Accounts Payable

Efficiency Ratios
Assets to Sales
Collection Period
Sales to Inventory
Sales to Net Working Capital
Accounts Payable to Sales