Return on Total Assets as a Percentage

In the Financial Manager, return on total assets (ROA) is the ratio of net income to total assets. A high return on assets can be attributed to a high profit margin, a rapid turnover of assets, or a combination of both.

This ratio expresses the gross earning power of the capital employed in the business.

The calculation for this ratio is

where:

Net Income = Sales – (Cost of Sales + Expenses)

Sales = the sum of all Income account types

Cost of Sales = the sum of all Cost of Sales account types

Expenses = the sum of all Expense account types

Total Assets = the sum of the following account types:

• Cash
• Accounts Receivable
• Inventory
• Other Current Assets
• Fixed Assets
• Accumulated Depreciation
• Other Assets

Example

If net income is $25,000, sales are $100,000, and total assets are $150,000, then this ratio expressed as a percentage is 16.67%.

The calculation for this example is