Which ratios indicate how efficiently the company generates sales from its assets?Quick asset ratioNet profit ratioSolvency ratioWorking capital turnover

The ratio that indicates how efficiently a company generates sales from its assets is the Working Capital Turnover ratio. This ratio measures how effectively a company is using its working capital to support sales. The higher the ratio, the more efficiently the company is believed to be using its short-term assets and liabilities to generate sales.

Here's how you calculate it:

Working Capital Turnover = Net Annual Sales / Average Working Capital

Where:

• Net Annual Sales is the gross sales minus any returns or refunds
• Average Working Capital is the average of the working capital (current assets - current liabilities) at the beginning and end of the time period.

The Quick asset ratio, Net profit ratio, and Solvency ratio are all important financial metrics, but they do not specifically measure how efficiently a company generates sales from its assets.

• The Quick asset ratio (or Acid-Test ratio) measures a company's ability to pay its short-term obligations with its most liquid assets.
• The Net profit ratio measures the percentage of revenue left after all expenses, interest, taxes and preferred stock dividends (but not common stock dividends) have been deducted from a company's total revenue.
• The Solvency ratio measures a company's ability to meet its long-term obligations. It is calculated by dividing a company's net income and depreciation by its long-term liabilities.