Return On Assets Definition - Formula - Example - Interpretation - Importance
What is Return On Assets Return On Assets means that how much efficient the management of the company is in managing the total assets of the company to generate revenues for the company. The ratio is used to judge the performance of the management of the company in efficient use of business’s resources (Assets) to generate profits (Income) for the business. Return On Assets Formula It is the ratio of Net Income To Total Assets. Mathematically, we can write as: Return On Assets = Net Income / Total Assets Here Net Income is obtained from Income Statement of the Company, while Total Assets include both Current Assets And Non Current Assets and these are obtained from the Balance Sheet of the Company. This ratio is expressed in term of percentage (%). Example Suppose, from the income statement of the company, net income is Rs. 500000 while Total Assets are Rs. 1000000, then the ratio is: 500000 / 1000000 = .5 Interpre...