Which of the following ratios are key components in measuring a company's operating efficiency? O Profit margin

O Equity ratio

O Return on total assets

O Total asset turnover

The most applicable answers are Profit Margin and Return on Total Assets.

Explanation:

Now lets see why only these two are correct.

What does Operating Efficiency mean? It simply means how good has the company performed at doing their main business activity. Or in more technical terms, how well has the business managed their inputs to get a profitable output (I'm avoiding major "terms" and trying to be as simple as possible!).

Profit margin is the remainder of the revenue after deducing all the costs related.

Return on total assets is calculated by considering the net profit and the average total assets of the company. Because the net profit is considered, the revenue and the related expenses are embedded in this ratio.

So, what about Equity ratio and Total asset turnover?

Both Equity ratio and Total asset turnover do not take into account the revenue and the costs. Equity ratio only considers Equity and total assets while Total asset turnover ration considers only the "Revenue" and not the costs related.