Return on total assets ratio
Return on total assets ratio (alternatively known as rate of return on total assets) is a profitability ratio that measures how wisely a company has invested in and managed its assets. This ratio can be arrived at in two ways: (1) net income before interest and taxes divided by total assets and (2) return on sales multiplied by asset turnover.
Definitions
According to College Accounting: A Practical Approach by Slater (13th edition),
- Return on total assets ratio. A profitability ratio that measures how wisely a company has invested in and managed its assets. This ratio can be arrived at in two ways: (1) net income before interest and taxes divided by total assets and (2) return on sales multiplied by asset turnover.
According to Managerial Accounting by Braun, Tietz (5th edition),
- Rate of return on total assets. Net income plus interest expense divided by average total assets. This ratio measures a company's success in using its assets to earn income for the people who finance the business; also called return on assets.
Related concepts
- Accounting (alternatively known as accountancy) is management of financial data, information, and knowledge about financial transactions of legal entities. Accountancy tends to include bookkeeping and, depending on a particilar enterprise, may also include quatitative analysis of financial data in the bookkeeping system and/or business intelligence.
