Return On Assets

The Return On Assets calculator computes the return based on the net income, interest expense (nt.

INSTRUCTIONS: Choose units and enter the following:

• (N) Net Income
• (I) Interest Expense, Net of Tax
• (CA) Current Total Assets
• (PA) Previous Total Assets

Return On Assets (ROA): The results are returned as a percentage.

The Math / Science

The Return on Assets ratio measures the profit earned by a corporation through use of all its capital, or the total of the investment by both creditors and owners. In addition, this ratio is a good indicator of how profitable a company is relative to its total assets. Return of Assets gives an idea as to how efficient management is at using its assets to generate earnings. Calculated by dividing annual earnings by its average total assets, Return on Assets is displayed as a percentage. Sometimes it is referred to as "return on investment".

The formula for Return on Assets is:

ROA = ((N+I)/((CA+PA)/2))

where:

• ROA = Return on Assets
• N = Net Income
• I = Interest Expense, Net of Tax
• CA = Current Total Assets
• PA = Previous Total Assets

The Return on Asset Ratio considers the investment made by all providers of capital, form short-term creditors to bondholders to stockholders. It is the measure of a company's success in earning a return for all providers of capital.

References