Operational Efficiency

A company’s operational efficiency is a factor of how a company is managed and can be gleaned from numerous accounting and financial ratios such as operating expenses to total revenues, or operating margin (where, for example, a business with a high fixed cost base is constantly under sales pressure vs one with a high level of variable costs). Operationally efficient companies optimise profits by streamlining and minimising costs (focusing on items such as inventory management, machinery or equipment utilisation, latitude to automate, staff levels) and optimising their production processes.