The efficiency of a business can best be determined by which of the following? A - HSC - SSCE Business Studies - Question 12 - 2017 - Paper 1

To evaluate the efficiency of a business, we need to analyze how well it manages its assets and liabilities in generating sales revenue. Each option provides a different perspective:

• A. Gross profit ratio: This ratio indicates the financial health of a company by showing the percentage of revenue that exceeds the cost of goods sold (COGS). While useful, it doesn’t directly measure overall efficiency.

• B. Value of current assets: This figure helps assess liquidity but does not give a complete picture of operational efficiency.

• C. Value of current liabilities: While understanding liabilities is important, it doesn’t measure how effectively the company utilizes its resources.

• D. Accounts receivable turnover ratio: This ratio specifically measures how efficiently a company collects its receivables, indicating cash flow effectiveness and operational efficiency. Thus, it provides a direct insight into the efficiency of a business in managing its receivables.

Therefore, the most appropriate answer is D. Accounts receivable turnover ratio.