After-Tax Return On Assets

DEFINITION of 'After-Tax Return On Assets'

A profitability measure that indicates how well a company uses its capital resources to generate income. To calculate after-tax return on assets, divide the company's total after-tax income by the value of its total assets. The resulting figure, multiplied by 100, will be a percentage; the higher the percentage, the more efficiently the company uses its assets.

BREAKING DOWN 'After-Tax Return On Assets'

The after-tax return on assets ratio can be helpful in comparing the profitability of different-sized companies because it allows investors to see how efficiently a company works with what it has, regardless of how big the company is. If a company has $20 million in net income and $100 million in total assets, its after-tax return on assets would be 20%. A smaller company might only bring in $5 million after taxes, but if its assets totaled $20 million, it would have a superior after-tax return on assets of 25%.

Trading Center