Question

To assess the operating efficiency with which resources are utilised, we may use ______.

Options

• Gross Profit Ratio

• Inventory Turnover Ratio

• Working Capital Turnover Ratio

• Inventory Turnover Ratio & Working Capital Turnover Ratio.

Answer 1

To assess the operating efficiency with which resources are utilised, we may use Inventory Turnover Ratio & Working Capital Turnover Ratio.

Explanation:

Operating efficiency reflects how quickly and productively a business converts its invested resources into sales or operational revenue. Turnover ratios, including the Inventory Turnover Ratio and Working Capital Turnover Ratio, are standard metrics for gauging this asset-utilisation capacity. The Inventory Turnover Ratio determines how effectively physical stock is being cleared and replaced, preventing capital blockage. Concurrently, the Working Capital Turnover Ratio evaluates how aggressively short-term liquid funds are put to work to generate sales.