Return On Net Assets - RONA


DEFINITION of 'Return On Net Assets - RONA'

A measure of financial performance calculated as:

Return On Net Assets (RONA)

Fixed assets are tangible property used in production, such as real estate and machinery. Net working capital is calculated by taking the company's current assets minus its current liabilities. The higher the return, the better the profit performance for the company. Individually, no single calculation tells the whole story of a company's performance, and Return On Net Assets is just one of many ratios that can be used to evaluate a company's financial health.


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BREAKING DOWN 'Return On Net Assets - RONA'

If the purpose of performing the calculation is to generate a longer-term perspective of the company's ability to create value, extraordinary expenses may be added back into the net income figure. For example, if a company had a net income of $10 million but incurred an extraordinary expense of $1 million, the net income figure could be adjusted upward to $11 million. This adjustment would not accurately reflect the company's Return On Net Assets in that year, but might provide an indication of the Return On Net Assets the company could expect in the following year if it did not have to incur any further extraordinary expenses.

  1. Working Capital

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  2. Return On Assets Managed - ROAM

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  3. Cash Return On Assets Ratio

    A ratio used to compare a businesses performance among other ...
  4. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses ...
  5. Return On Assets - ROA

    An indicator of how profitable a company is relative to its total ...
  6. Net Income - NI

    1. A company's total earnings (or profit). Net income is calculated ...
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  1. Can working capital be too high?

    A company's working capital ratio can be too high in the sense that an excessively high ratio is generally considered an ... Read Full Answer >>
  2. Does working capital include salaries?

    A company accrues unpaid salaries on its balance sheet as part of accounts payable, which is a current liability account, ... Read Full Answer >>
  3. What is a profit and loss (P&L) statement and why do companies publish them?

    A profit and loss (P&L) statement, or balance sheet, is essentially a snapshot of a company's financial activity for ... Read Full Answer >>
  4. How do I use discounted cash flow (DCF) to value stock?

    Discounted cash flow (DCF) analysis can be a very helpful tool for analysts and investors in equity valuation. It provides ... Read Full Answer >>
  5. How do dividends affect the balance sheet?

    Dividends paid in cash affect a company's balance sheet by decreasing the company's cash account on the asset side and decreasing ... Read Full Answer >>
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