What is Operating Performance and Which Ratios Measure Operating Performance?
Imagine you’re looking to invest into a company. You want to be sure that they are operationally efficient and that the management is investing into assets that successfully produce revenue. Operating performance ratios are calculated to provide you with that information. They tell you exactly how much return is generated from all or specific assets. In this article we will explain:
1. What is Operating Performance?
2. Which Ratios are Used to Measure Operating Performance?
3. How to Calculate Operating Performance Ratios
1. What is Operating Performance?
Operating performance measures results relative to the assets used to achieve those results. The focus of determining Operating Performance is on how well assets are converted into earnings, and how efficiently resources are used to generate revenue. A business with excellent performance ratios can generate a high level of sales with relatively few resources, and generates a high level of cash inflows. Due to the large variations in assets and sales across different industries, comparing with companies in the same industry is essential, as with all financial analysis.
