Efficiency ratios are a financial measure that measures how effectively a company uses its assets as well as how it manages its liabilities. Efficiency ratios are used to determine repayment of liabilities, receivables turnover, Inventory Turnover and assets utilization, period of receivables, etc. It is used to calculate the efficiency of the companies.
Efficiency Ratios are also known as Activity Ratios. Investors use this metric to analyze the company's ability to utilize its resources.