The correct answer is: D. All of the above
Efficiency ratios are financial metrics that measure how efficiently a company uses its assets and liabilities to generate sales. They are used to compare a company’s performance over time and to benchmark it against other companies in the same industry.
The average collection period is a measure of how long it takes a company to collect its receivables. It is calculated by dividing the accounts receivable by the average daily sales. A higher average collection period indicates that a company is having difficulty collecting its receivables, which can lead to cash flow problems.
The inventory turnover ratio is a measure of how efficiently a company manages its inventory. It is calculated by dividing the cost of goods sold by the average inventory. A higher inventory turnover ratio indicates that a company is selling its inventory more quickly, which can lead to lower costs and higher profits.
The fixed assets turnover ratio is a measure of how efficiently a company uses its fixed assets to generate sales. It is calculated by dividing the sales by the net fixed assets. A higher fixed assets turnover ratio indicates that a company is using its fixed assets more efficiently, which can lead to higher profits.
All of these ratios are important for understanding a company’s financial performance. They can be used to identify areas where a company can improve its efficiency and profitability.