Question

return on assets definition and how to calculate

Answer 1

Return on assets: Return on assets measures the profitability. It measures the income earned per unit of assets. It shows how efficiently a firm is using its assets to generate income. Return on assets can be calculated as below:

Return on assets ratio = Net income / Average total assets * 100

where, Average total assets = Beginning assets + Ending assets / 2

A higher return on assets ratio is better, indicating that assets are being effectively & efficiently utilized.