Efficiency ratios measure asset and resource utilization

Steps:

• Recall efficiency ratios evaluate how effectively assets generate revenue, often via turnover formulas.
• Assess option 1: Expenses to revenue ratio tracks cost control, not asset use.
• Assess option 2: Inventory turnover = sales / average inventory, measures stock management efficiency.
• Assess option 3: Non-current asset turnover = sales / non-current assets, gauges fixed asset productivity.
• Assess option 4: Return on capital employed = EBIT / capital employed, measures profitability, not efficiency.

Why B is correct:

• Inventory and non-current asset turnovers are core efficiency ratios, using turnover formulas to show revenue per unit of asset.

Why the others are wrong:

• A includes expenses to revenue, a profitability metric.
• C includes return on capital employed, a profitability ratio.
• D selects only return on capital employed, ignoring true efficiency ratios.

Final answer: B