Return on total assets's calculation formula
Return on total assets is also called total asset profit rate, return on total assets and total asset profit rate. Refers to the ratio of earnings before interest and tax to average total assets of an enterprise. It is used to evaluate the overall profitability of enterprises using all assets, and it is an important index to evaluate the efficiency of enterprise assets operation.
Return on total assets's calculation formula:
Return on total assets = (total profit+interest expense)/average total assets × 100%, in which average total assets = (total assets at the beginning+total assets at the end) /2.
How to analyze the return on total assets?
(1) return on total assets indicates the level of income from all assets of an enterprise, which comprehensively reflects the profitability and input-output status of the enterprise. The higher the index, the better the input-output level of the enterprise, and the more effective the asset operation of the enterprise.
(2) In general, enterprises can compare return on total assets with market interest rates. If the return on total assets is greater than the market interest rate, it shows that enterprises can make full use of financial leverage to operate and get as much income as possible.
(3) When evaluating the total return on assets, we need to compare it with the previous ratio and other enterprises in the same industry, and we can also analyze the influencing factors of the total return on assets.
What is the difference between return on total assets and net interest rate of total assets?
Return on total assets is the ratio of the total remuneration to the average total assets of an enterprise in a certain period. The net interest rate of total assets refers to the percentage of the company's net profit to the average total assets. The "reward" in return on total assets may be any form of "profit", and its scope is relatively large, which may be net profit, profit before interest and tax, or total profit. This is not necessarily the case.
The net interest rate of total assets refers to the percentage of the company's net profit to the average total assets. This index reflects the profit level of the company using all its assets, that is, how much profit the company can get on average per 1 yuan of assets. The higher the index, the higher the input-output level of the company, the more effective the asset operation and the higher the cost control level. Reflect the level of enterprise management. Its calculation formula is: net interest rate of total assets = net profit/average total assets.