Effectiveness has to do with comparing actual results with budgeted, forecast, or expected results. These ratios can be calculated on any item for which actual and expected results are available, and which are of interest in managing the business. Some examples include:
Forecast Profit / Actual Profit
Forecast Sales / Actual Sales
Forecast Production / Actual Production
Forecast Trade Receivables / Actual Trade Receivables
It should be noted that calculating the ratios as indicated above will yield a ratio greater than 1.0 if actual results are lower than forecast results. If you want to see a ratio of less than 1.0 if actual results are lower (for example, you want to see what percentage of forecast or budgeted profit you actually achieved) you would have to invert the ratios.
To see how efficiently you controlled expenses, you could calculate efficiency ratios of any individual expense item, or any grouping or total expenses:
Efficiency = Forecast Expenses / Actual Expenses
In addition to effectiveness and efficiency, quality control is another concern that can be expressed through ratio analysis:
Number of Customer Complaints / Number of Customers
Number of Late Deliveries / Total Orders Delivered
Quality Evaluation and Assurance Costs / Sales
Costs of Damages and Defects (Sales Returns) / Sales