| Abstract: | In this paper a sample of UK mechanical engineering companies is ranked by a number of one-factor and two-factor efficiency measures. Of the one-factor measures, profitability proves to be most closely related to the more theoretically correct two-factor measures. Whilst this empirical finding supports a priori reasoning, care must be taken with its interpretation. For when profitability differences between companies do not reflect efficiency differences, conventional two-factor efficiency measures will themselves be unreliable indicators of true efficiency. |
