Operating Efficiency Ratios – Meaning, Formula, Calculation & Interpretations [Video]

This tutorial covers the most important aspects of the operating efficiency ratios. You will learn precisely asset turnover ratio, net fixed asset turnover ratio, and equity turnover ratio. Further, we have discussed in detail their meanings, formulas, calculations, and interpretations.

What are Operating Efficiency Ratios?
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Operating efficiency ratios analyze how efficiently a company uses its resources such as assets and shareholder’s equity to generate income.

Operating Efficiency Ratios Formulas
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– Asset Turnover Ratio = Net Sales / Average Total Assets
– Net Fixed Asset Turnover Ratio = Net Sales / Average Net Fixed Assets.
– Equity Turnover Ratio = Net Sales / Average Shareholder’s Equity

Relevance and Use
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– Asset turnover ratio is a metric that measures how effectively a company uses its assets to earn revenue.
– Net fixed asset turnover ratio measures how well a company utilizes its machines and equipment to generate revenue.
– Equity turnover ratio is used to determine whether the company is generating enough revenue to justify the shareholders’ holding of its equity.

For more details, you can refer to our articles –
https://www.wallstreetmojo.com/asset-turnover-ratio/
https://www.wallstreetmojo.com/fixed-asset-turnover-ratio-formula/
https://www.wallstreetmojo.com/equity-turnover-ratio/

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