Multiple choice

Which of the following is an efficiency ratio?

  1. Price-Earning Ratio

  2. Debt-Equity Ratio

  3. Acid-Test Ratio

  4. Average collection period
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Efficiency ratios measure how effectively a company uses its assets and manages its operations. Average collection period (accounts receivable days) measures how quickly customers pay - an important efficiency metric. P/E ratio is valuation, Debt-Equity is solvency/leverage, and Acid-Test is liquidity - none are efficiency ratios.

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