Return on Assets

Online Calculators for Business & Investment

Return on Assets

Along with the return on equity, the Return on Assets is one of the most fundamental measures of the success of a business. It takes pre-tax profit, adds back the interest expense and uses the result in a ratio against the assets of the business. What it is telling us is the return generated by the assets of the business for those who funded the assets; these being the stockholders (pre-tax profit) and creditors (interest expense). It is measured as a percentage of the average level of assets over the period.

Why is so much emphasis placed on the Return on Assets? This is because it is a simple indicator to calculate while giving great insight into the success of management to those who fund, or own, the business but are outside management. All the money shareholders or creditors invest in the business is allocated by management in the purchase on income generating assets. If these allocation decisions are good, then the Return on Asset figure will also be strong.

As mentioned, the result is a percentage. So if you have a Return on Assets of 18% this means for every dollar of assets in the business, 18% (or 18 cents) of that is available as a return for those who fund the business.

Return on Assets Calculator

The calculator asks for:
Income Before Tax, which is found on the income statement.
Interest Expense, which is also found on the income statement.
Assets at the Start of Period, which is found on the previous balance sheet.
Assets at the End of Period, which is found on the current balance sheet.

Income Before Tax ($):

Interest Expense ($):

Assets at Start of Period ($):

Assets at End of Period ($):

Return on Assets (%):

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