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What is the return on assets ratio?

Author:
Harold Averkamp, CPA, MBA

Definition of Return on Assets Ratio

The return on assets ratio, or return on total assets ratio, relates a company’s net income during a specific year, to the company’s average total assets during the same year.

The return on assets ratio for a regular corporation can be computed using the before tax earnings and/or the after tax earnings.

Example of Return on Assets Ratio

Assume that during its most recent year, a company’s income statement reported net income of $60,000. During the same period, the company’s 12 monthly balance sheets reported an average of $1,000,000 in total assets. The company’s return on assets ratio for the year was 6% ($60,000 divided by $1,000,000).

This company’s return on assets can be compared to other companies in the same industry.

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About the Author

Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

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