Formula
to calculate return on assets:
Return
on Assets = net profit before taxes / total assets.
Return
on assets ratio definition and explanation:
The
return on assets
ratio provides a standard for evaluating how efficiently
financial management employs the average dollar invested
in the firm's assets, whether the dollar came from
investors or creditors.
A low
return on assets ratio indicates that the earnings are
low for the amount of assets.
The return
on assets
ratio measures how efficiently profits are being
generated from the assets employed.
A low
return on assets ratio compared to industry averages
indicates inefficient use of business assets.
The return on assets ratio is included in the RA-150
Expert financial statement ratio analysis spreadsheet,
which provides formulas, definitions, calculation,
charts and explanations of each ratio.
The return on assets ratio is listed in our profitability
ratios.
Spreadsheets to
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explanations and charts):
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and explain.
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