Return On Total Assets - ROTA

Loading the player...

What is 'Return On Total Assets - ROTA'

Return on total assets (ROTA) is 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)

BREAKING DOWN '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. Times Interest Earned - TIE

    A metric used to measure a company's ability to meet its debt ...
  2. Earnings Before Interest & Tax ...

    An indicator of a company's profitability, calculated as revenue ...
  3. Asset Earning Power - AEP

    The earnings generated by a business relative to its asset base. ...
  4. Long Term Debt To Total Assets ...

    A measurement representing the percentage of a corporation's ...
  5. Asset Coverage Ratio

    A test that determines a company's ability to cover debt obligations ...
  6. Interest Coverage Ratio

    A debt ratio and profitability ratio used to determine how easily ...
Related Articles
  1. Economics

    Explaining Return On Total Assets (ROTA)

    Return on total assets (ROTA), is an accounting ratio that indicates how well a company is using its assets to generate earnings.
  2. Investing Basics

    EBIT (Earnings Before Interest and Taxes)

    Earnings before interest and taxes, or EBIT, takes a company’s revenue, or earnings, and subtracts its cost of goods sold and operating expenses.
  3. Fundamental Analysis

    Calculating Return on Net Assets

    Return on net assets measures a company’s financial performance.
  4. Investing

    Total Debt to Total Assets

    Total Debt to total assets, also called the debt ratio, is an accounting measurement that shows how much of a company’s assets are funded by borrowing. In business, borrowing is also called leverage.
  5. Economics

    Calculating Long-Term Debt to Total Assets Ratio

    A company’s long-term debt to total assets ratio shows the percentage of its assets that are financed with long-term debt.
  6. Professionals

    The Income Statement: Key Calculations

    FINRA/NASAA Series 65 - The Income Statement: Key Calculations. This section explains calculations of operating income, EBIT, Net income and cash flow.
  7. Investing

    Asset Turnover Ratio

    Investopedia explains: The asset turnover ratio is a measure of a company's ability to use its assets to generate sales or revenue, and is a calculation of the amount of sales or revenue generated ...
  8. Professionals

    Ratio Analysis

    Formulas Used in Fundamental Analysis
  9. Investing

    Ratio Analysis

    Ratio analysis is the use of quantitative analysis of financial information in a company’s financial statements. The analysis is done by comparing line items in a company’s financial ...
  10. Active Trading

    Value Investing: Finding Value In Financial Reports And Balance Sheets

    There is plenty of information about a company that you'll want to know as a value investor, but that you can't get from a casual glance at a stock quote or from reading most stock market ...
RELATED FAQS
  1. What is the difference between the return on total assets and an interest rate?

    Learn the difference between the return on total assets and an interest rate; the former is a profitability ratio, and the ... Read Answer >>
  2. What are some of the limitations of looking only at the return on total assets?

    Learn about the return on total assets ratio and why the weaknesses of this metric make it an unreliable standalone measure ... Read Answer >>
  3. How can a company increase its return on total assets?

    Learn about return on total assets (ROTA) and how a business can increase its ratio by increasing revenue, decreasing expenses ... Read Answer >>
  4. What is the difference between EBIT and operating income?

    Read about some of the subtle differences identified by the SEC between earnings before interest and taxes, or EBIT, and ... Read Answer >>
  5. What is the difference between EBIT and EBITDA?

    Take a deeper look at the actual differences between EBIT and EBITDA, and see how investors often confuse these terms with ... Read Answer >>
  6. How is EBIT breakeven affected by leverage and financing plans?

    Read about how financial leverage increases the break-even point for a corporation, which is the point at which earnings ... Read Answer >>
Hot Definitions
  1. Goodwill

    An account that can be found in the assets portion of a company's balance sheet. Goodwill can often arise when one company ...
  2. Return On Invested Capital - ROIC

    A calculation used to assess a company's efficiency at allocating the capital under its control to profitable investments. ...
  3. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  4. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  5. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  6. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
Trading Center