How To Determine The Return On Assets

Table of contents:

How To Determine The Return On Assets
How To Determine The Return On Assets

Video: How To Determine The Return On Assets

Video: How To Determine The Return On Assets
Video: How to Calculate ROA (Return on Assets) 2024, November
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The results of the economic activity of any company must be analyzed. As a rule, the economic analysis of activities is carried out at the end of the reporting period, when the balance sheet is formed. One of the indicators of the economic efficiency of the enterprise is profitability.

How to determine the return on assets
How to determine the return on assets

It is necessary

  • 1. Financial statements for the analyzed period:
  • - Balance sheet (form No. 1 of the quarterly financial statements);
  • - Profit and loss statement (form No. 2 of the quarterly financial statements).
  • 2. Formula for calculating the return on assets of an enterprise:
  • Ra = P / A x 100%, where:
  • - Ra - return on assets,%;
  • - P - net profit for the analyzed period, thousand rubles;
  • - A is the average value of the assets of the enterprise for the period, thousand rubles.

Instructions

Step 1

To analyze the efficiency of using the assets (capital) of the enterprise, the return on assets indicator is calculated. Return on assets shows the amount of profit attributable to each ruble of the value of assets (capital) of the enterprise. The return on assets is considered normal when the indicator is 18-20%.

Step 2

Determine the amount of the company's net profit for the analyzed period. Take the amount of the company's net profit according to the "Profit and Loss Statement" (line 190).

Step 3

Calculate the average value of the assets of the company for the analyzed period. To do this, add the totals of the balance sheet asset at the beginning and end of the reporting period (data in line 300). Divide the resulting amount of assets by 2. So you will calculate the average value of the assets of the company for the period.

Step 4

Calculate the return on assets of the enterprise as follows. Divide the amount of the company's net profit by the calculated average asset value of the company. Multiplying the resulting coefficient by 100%, you will get the return on assets of the enterprise for the analyzed period.

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