Which factor is directly used to evaluate the efficiency of the operating cycle?

The days' sales of inventory is a critical metric used to evaluate the efficiency of the operating cycle because it measures the average number of days that a company takes to sell its inventory. A shorter duration indicates that a company is efficiently converting its inventory into sales, which is an essential aspect of the operating cycle.

In the context of the operating cycle, efficiency is largely about how quickly a business can turn its inventory into cash. The days' sales of inventory helps assess this by indicating how well a company controls its inventory levels and the effectiveness of its sales strategies. A lower number of days suggests that the company is effectively managing its inventory, leading to quicker cash flow and aiding overall operational efficiency.

Other factors, while important for financial analysis, do not directly measure the efficiency of the operating cycle. For instance, accounts payable turnover focuses on how quickly a company pays its suppliers, cash flows from operating activities provide insights into the cash generated from operations but don't specifically relate to inventory management, and return on equity reflects profitability rather than the operational efficiency directly associated with the turnover of inventory.