EFFICIENCY

company 1 company 1
Rat i os f or OPERATI ON - EF F I CI ENCY 2021 2020
Rat i o f or t ur nover of f i xed as s et s 3.15 2.29
Rat i o f or i nc ome/s al es per empl oyee 3,450.98 3,258.29
Ret ur n of expens es per empl oyee 0.46 0.38
Rat i o f or t ur nover of r ec ei vabl es 27.17 31.98
Rat i o f or aver age per i od f or r ec ei vabl e c ol l ec t i on 13.43 11.41
Rat i o f or t ur nover of s t oc k - 0.09 - 0.10
Rat i o f or aver age per i od of mai nt ai n s t oc k - 4,148.89 - 3,749.74

COMPANY 1.

1. Ratio for turnover of fixed assets

The fixed asset turnover ratio reveals how efficient a company is at generating sales from its
existing fixed assets. A higher ratio implies that management is using its fixed assets more
effectively. So, when we compare the ratios for Company.1: 3.15 for 2021 and 2.29 for 2020 we
can end that company 1 was more efficient in 2021 compared with 2020.

2.Ratio for income/sales per employee

Revenue per employee is an efficiency ratio used to determine the revenue generated per
individual working at a company. The revenue per employee ratio is important for determining
the efficiency and productivity of the average employee of a company. The sales-per-employee
ratio is calculated as a company's annual sales divided by its total employees. Annual sales and
employee numbers are easily found in financial statements and annual reports. The sales-per-
employee ratio provides a broad indication of how expensive a company is to run. A higher ratio
indicates greater productivity, which often translates to more profits for the company. By the
results of the above table, we conclude that, Company.1 generated more revenue per employee in
2021 compared with 2020.

3.Ratio for average period for receivable collection

The average collection period ratio measures the average number of days clients take to pay their
bills, indicating the effectiveness of the business's credit and collection policies. This ratio also
determines if the credit terms are realistic. The ratio should be kept as less as possible.
Acceptable limits from 30 days are standard, but in practice is always much longer. As we can
see from the above table 13 and 11 days are reasonable values. So in both years the Company
shows a good overview.

4.Ratio for average period of maintain stock

Average inventory period value shows the efficiency of the company in terms of its operations.
For instance, a small average inventory period means that the company is more efficient in its
operations because it takes less time to turn its stock into cash hence increasing cash flow.

From the results we can conclude that in both years the company is, approximately the same
situation.

COMPANY 2.
company 2
Rat i o s f o r OP ERATI ON - EF F I CI ENCY
Rat i o f or t ur nov e r of f i x e d as s e t s 0.88
Rat i o f or i nc ome/s al e s pe r e mpl o ye e 1,988.37
Re t ur n o f e xpe ns e s per e mpl o yee 0.16
Rat i o f or t ur nov e r of r e c ei vabl e s 15.15
Rat i o f or ave r age pe r i o d f o r r ec e i v abl e c ol l e c t i on 24.09
Rat i o f or t ur nov e r of s t o c k 0.30
Rat i o f or ave r age pe r i o d of mai nt ai n s t o c k 1,227.44

From the above results we can conclude that Company 2 : In sum for each dollar of assets
generates 88 cents in sales. The higher the ratio, the more efficient the company is using its
assets to make sales. It generates $1988 revenue per employee. It takes 24 days to collect its
receivables. A lower average, say around 26 days, would indicate collection is efficient and
effective. Ratio of turnover of stock indicates that the organization has cleared and replaced its
inventory 30 times in a given financial period. In my opinion, the company is in good financial
condition.