Return on total assets = (total profit + interest expense) / average total assets Taken from the company's "Balance Sheet"
Average total assets = (total assets at the beginning of the year + total assets at the end of the year)/2
Return on total assets is analyzed based on investment returns Enterprise profitability is the ratio between enterprise investment return and total investment. The investment return of an enterprise refers to the sum of profits before payment of interest and income tax, and the total investment is the average total assets of the current period.
Return on total assets (English: Return On Total Assets, ROA) is also called asset income rate. It refers to the ratio of the total remuneration received by an enterprise within a certain period to the average total assets. It represents the overall profitability of all assets of an enterprise, including net assets and liabilities, and is used to evaluate the overall profitability of an enterprise's use of all assets. It is an important indicator for evaluating the operating efficiency of an enterprise's assets.
Extended information:
Application example
Calculation example of return on total assets:
According to the data, the net profit of XYZ Company in 2001 was 8 million yuan, income tax of 3.75 million yuan, interest expenses of 4.8 million yuan, and total assets at the end of the year of 84 million yuan; in 2002, net profit was 6.8 million yuan, income tax of 3.2 million yuan, interest expenses of 5.5 million yuan, and total assets at the end of the year were 100 million yuan. Assuming that the total assets at the beginning of 2001 were RMB 75 million, the return on total assets of XYZ Company is calculated as follows:
The return on total assets in 2001 = (80375+480)/[(7508400)/2 ] * 100% = 20.82%
Return on total assets in 2002 = (6832550)/[(84010000)/2] *100% = 16.85%
From the calculation results, it can be seen that the return on total assets of XYZ Company in 2002 was much lower than that of the previous year. It is necessary to analyze the use of the company's assets? Increase production and save money? Analyze it together with cost-effectiveness indicators to improve management, improve asset utilization efficiency and the enterprise Improve business management level and enhance profitability.
Reference: Baidu Encyclopedia----Return on Total Assets