Efficiency Ratios
Definition
Ratios such as inventory turnover, asset turnover and receivables turnover that measure how well a business uses its assets and manages its working capital to generate sales.
Related Terms in Financial Analysis
DuPont Analysis
A framework that breaks return on equity into profit margin, asset turnover and financial leverage, revealing which of the three is really driving — or dragging — a company's return on equity.
Budget Variance
The difference between a budgeted figure and the actual result. Favourable variances improve profit versus plan; adverse variances reduce it. Analysing them keeps spending and performance on track.
Rolling Forecast
A forecast that is continually updated by adding a new period as each one ends, always looking the same distance ahead. It keeps planning current instead of fixed to a single annual budget.
Zero-Based Budgeting
A budgeting method where every expense must be justified from a zero base each period, rather than carried over and adjusted from last year's budget. It forces scrutiny of all spending but takes more effort.
Stop memorising terms — let HelloBooks do the work
AI-assisted bookkeeping that handles invoicing, GST, reconciliations, and reports automatically. Free to start.