What is the best description of an efficiency ratio?
A) A measure of how well a company converts revenue into earnings
B) A measure of how quickly a company processes accounts receivables
C) A measure of a firm's return on assets (ROA)
D) A measure of the efficiency of a company's logistics

Question

Quizplus · Accepted Answer

An efficiency ratio measures how well a company is able to convert its revenue into earnings. It typically compares the company's operating expenses to its revenue, indicating how efficiently the company is using its resources to generate profits.

Answer: B, D
 Options B and D are not accurate descriptions of an efficiency ratio. Option B refers to a company's accounts receivable turnover ratio, while option D is more closely related to measuring supply chain efficiency.

What Is the Best Description of an Efficiency Ratio