Return On Total Assets - ROTA

AAA

DEFINITION of 'Return On Total Assets - ROTA'

A ratio that measures a company's earnings before interest and taxes (EBIT) against its total net assets. The ratio is considered an indicator of how effectively a company is using its assets to generate earnings before contractual obligations must be paid.

To calculate ROTA:

Return On Total Assets (ROTA)

INVESTOPEDIA EXPLAINS 'Return On Total Assets - ROTA'

The greater a company's earnings in proportion to its assets (and the greater the coefficient from this calculation), the more effectively that company is said to be using its assets.

To calculate ROTA, you must obtain the net income figure from a company's income statement, and then add back interest and/or taxes that were paid during the year. The resulting number will reveal the company's EBIT. The EBIT number should then be divided by the company's total net assets (total assets less depreciation and any allowances for bad debts) to reveal the earnings that company has generated for each dollar of assets on its books.

RELATED TERMS
  1. Amortization

    1. The paying off of debt in regular installments over a period ...
  2. Earnings Before Interest & Tax ...

    An indicator of a company's profitability, calculated as revenue ...
  3. Return On Assets - ROA

    An indicator of how profitable a company is relative to its total ...
  4. Return On Net Assets - RONA

    A measure of financial performance calculated as: Fixed assets ...
  5. Allowance For Doubtful Accounts

    A contra-asset account that records the portion of a company's ...
  6. Charge-Off

    A term describing an expense on a company's income statement. ...
Related Articles
  1. ROA And ROE Give Clear Picture Of Corporate ...
    Markets

    ROA And ROE Give Clear Picture Of Corporate ...

  2. The 4 R's Of Investing In Retail
    Fundamental Analysis

    The 4 R's Of Investing In Retail

  3. Looking Deeper Into Capital Allocation ...
    Investing Basics

    Looking Deeper Into Capital Allocation ...

  4. How To Evaluate A Company's Balance ...
    Investing Basics

    How To Evaluate A Company's Balance ...

comments powered by Disqus
Hot Definitions
  1. Last In, First Out - LIFO

    An asset-management and valuation method that assumes that assets produced or acquired last are the ones that are used, sold ...
  2. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  3. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  4. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  5. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  6. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
Trading Center