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Return On Assets(ROA) Back

Total assets: Measures the efficiency of assets used to generate income by the amount of profit generated for every $100 invested in assets. Income from Operations excludes any expenses such as income taxes and financing charges. Average Total Assets are used due to the variation in the amount of assets used by the business.

Fixed assets: A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be consumed or converted into cash any sooner than at least one year's time.

Tangible assets:An asset that has a physical form such as machinery, buildings and land.

Here, the profitability ratio is measured in terms of the relationship between net profits and assets. The ROA may also be called Profit-to-Asset Ratio. There are various possible approaches to define net profits and assets, according to the purpose and intent of the calculation of the ratio. Depending upon how these two terms are defined, many variations of ROA are possible.
The concept of net profit may be (i) net profits after taxes, (ii) net profits after taxes plus interest, and (iii) net profits after taxes plus interest minus tax savings. Assets may be defined as (i) Total Assets, (ii) Fixed Assets, and (iii) Tangible Assets. Accordingly, the different variants of the RAO are-


Based on Total Assets
Net Profit After Taxes (INR)*  
Interest *  
Asset's Value (Average) *  
 
 
 
All fields marked as (*) are mandatory in case of ROI Based on Tangible Assets and Based on Fixed Assets.
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