The return on total assets is another very useful ratio when analyzing the profitability of a company. It is another indicator to measure the profitability of enterprises.
The formula is: return on total assets = (net profit/average total assets) × 100%. The return on total assets is the ratio used to analyze the profitability of a company.
Namely: return on total assets is the ratio of the company's net profit to the average total assets.
Second, the practical significance of the return on total assets:
Investors often pay attention to the profit realization effect related to the invested assets when assessing the realization of enterprise profit targets, and often judge by earnings per share and return on net assets. In fact, the return on total assets is also a very effective indicator. The level of return on total assets directly reflects the company's competitive strength and development ability, and it is also an important basis for deciding whether the company should borrow money to operate. Return on total assets and ROE are analyzed together, and the risk degree of the company's operation can be explained according to the difference between them. It can also make up for the lack of consideration of corporate debt factors in the return on net assets.
Third, how to judge the return on total assets?
The higher the return on total assets, the better, but different industries have different risk preferences. For example, the asset profit rate of general manufacturing enterprises is between 5- 10%, and it is good to get 10%-20%, but the interest rate of one-year bank deposits in return on total assets cannot be lower, otherwise it means that investors will not be able to make favorable returns, and higher capital costs will be paid.
Fourth, the difference between the rate of return on total assets and the rate of return on assets.
Return on total assets is the ratio of net profit to average total assets, and return on total assets = (net profit/average total assets) × 100%. The profit rate of assets, also known as the profit rate of enterprise capital, is an index reflecting the profitability of enterprise assets. Refers to the ratio between the profits realized by an enterprise in a certain period and the average assets occupied in the same period. It can be seen that return on total assets and asset profit rate have different views, but the meaning and calculation formula are the same.