Return On Total Assets - ROTA

A A A

DEFINITION

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

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 of time. 2. ...
  2. Earnings Before Interest & Tax ...

    An indicator of a company's profitability, calculated as revenue minus expenses, ...
  3. Charge-Off

    A term describing an expense on a company's income statement. A charge-off will ...
  4. Depreciation

    1. A method of allocating the cost of a tangible asset over its useful life. ...
  5. Return On Assets - ROA

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

    A measure of financial performance calculated as: Fixed assets are tangible ...
  7. Allowance For Doubtful Accounts

    A contra-asset account that records the portion of a company's receivables, ...
  8. Working Capital

    This ratio indicates whether a company has enough short term assets to cover ...
  9. Price-To-Cash-Flow Ratio

    The ratio of a stock’s price to its cash flow per share. The price-to-cash-flow ...
  10. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. ...
Related Articles
  1. The 4 R's Of Investing In Retail
    Fundamental Analysis

    The 4 R's Of Investing In Retail

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

    Looking Deeper Into Capital Allocation ...

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

    How To Evaluate A Company's Balance ...

  4. Use ROA To Gauge A Company's Profits
    Budgeting

    Use ROA To Gauge A Company's Profits

  5. ROA And ROE Give Clear Picture Of Corporate ...
    Markets

    ROA And ROE Give Clear Picture Of Corporate ...

  6. How Return On Equity Can Help You Find ...
    Economics

    How Return On Equity Can Help You Find ...

  7. 4 Leverage Ratios Used In Evaluating ...
    Fundamental Analysis

    4 Leverage Ratios Used In Evaluating ...

  8. How Does Goodwill Affect Stock Prices?
    Investing Basics

    How Does Goodwill Affect Stock Prices?

  9. Why is it sometimes better to use an ...
    Investing Basics

    Why is it sometimes better to use an ...

  10. How do you calculate working capital?
    Investing Basics

    How do you calculate working capital?

comments powered by Disqus
Hot Definitions
  1. Genuine Progress Indicator - GPI

    A metric used to measure the economic growth of a country. It is often considered as a replacement to the more well known gross domestic product (GDP) economic indicator. The GPI indicator takes everything the GDP uses into account, but also adds other figures that represent the cost of the negative effects related to economic activity (such as the cost of crime, cost of ozone depletion and cost of resource depletion, among others).
  2. Accelerated Share Repurchase - ASR

    A specific method by which corporations can repurchase outstanding shares of their stock. The accelerated share repurchase (ASR) is usually accomplished by the corporation purchasing shares of its stock from an investment bank. The investment bank borrows the shares from clients or share lenders and sells them to the company.
  3. Microeconomic Pricing Model

    A model of the way prices are set within a market for a given good. According to this model, prices are set based on the balance of supply and demand in the market. In general, profit incentives are said to resemble an "invisible hand" that guides competing participants to an equilibrium price. The demand curve in this model is determined by consumers attempting to maximize their utility, given their budget.
  4. Centralized Market

    A financial market structure that consists of having all orders routed to one central exchange with no other competing market. The quoted prices of the various securities listed on the exchange represent the only price that is available to investors seeking to buy or sell the specific asset.
  5. Balanced Investment Strategy

    A portfolio allocation and management method aimed at balancing risk and return. Such portfolios are generally divided equally between equities and fixed-income securities.
  6. Negative Carry

    A situation in which the cost of holding a security exceeds the yield earned. A negative carry situation is typically undesirable because it means the investor is losing money. An investor might, however, achieve a positive after-tax yield on a negative carry trade if the investment comes with tax advantages, as might be the case with a bond whose interest payments were nontaxable.
Trading Center