Return on assets (ROA) is an indicator of how a company manages its existing assets to generate revenue. If ROA is low, your asset management may be ineffective. A high ROA, on the contrary, indicates the smooth and efficient functioning of the company.

Formula for calculating a company's return on assets

ROA is usually expressed as a percentage. The calculation is made by dividing the net profit for the year by the total value of assets. If, for example, a clothing store's net income was 1 million and its total assets were 4 million, then ROA would be calculated as follows:

1/4 x 100 = 25%

Calculating ROA allows you to see the return on investment and assess whether sufficient revenue is being generated from the available assets.

ROA profitability management

The head of the enterprise studies the ROA indicator at the end of the year. If ROA is high, it is a good sign that the company is getting the most out of its existing assets. Comparing it with other indicators, such as return on investment, we can conclude that further investment is advisable, since the company is able to use investments with high efficiency.

Studying low ROA is vital to effectively running a company. If this ratio is consistently low, it may indicate that either management is not using existing assets effectively enough, or those assets are no longer valuable. For example, in the case of the same clothing store, it may turn out that profits can be increased by reducing the retail space, therefore, such an asset as a large area is no longer valuable.

Banks and potential investors pay attention to ROA and ROI indicators before deciding to provide a loan or further investment. If similar companies generate more revenue with similar inputs, investors may flock to them or conclude that management is not managing its assets effectively.

Increase in gross income

ROA can motivate management to use assets more efficiently. Seeing that revenue is not as high as it should be, managers make appropriate adjustments to the activities of the enterprise. ROA can also show what improvements can be made to increase gross income through proper asset management. This is in any case better than endlessly investing in a company, hoping for the best.

In the system of performance indicators for enterprises, the most important place belongs to profitability.

Profitability represents a use of funds in which the organization not only covers its costs with income, but also makes a profit.

Profitability, i.e. enterprise profitability, can be assessed using both absolute and relative indicators. Absolute indicators express profit and are measured in monetary terms, i.e. in rubles. Relative indicators characterize profitability and are measured as percentages or as coefficients. Profitability indicators are much less influenced than by profit levels, since they are expressed by different ratios of profit and advanced funds(capital), or profits and expenses incurred(costs).

When analyzing, the calculated profitability indicators should be compared with the planned ones, with the corresponding indicators of previous periods, as well as with data from other organizations.

Return on assets

The most important indicator here is return on assets (otherwise known as return on property). This indicator can be determined using the following formula:

Return on assets- this is the profit remaining at the disposal of the enterprise, divided by the average amount of assets; multiply the result by 100%.

Return on assets = (net profit / average annual assets) * 100%

This indicator characterizes the profit received by the enterprise from each ruble, advanced for the formation of assets. Return on assets expresses a measure of profitability in a given period. Let us illustrate the procedure for studying the return on assets indicator according to the data of the analyzed organization.

As can be seen from the table, the actual level of return on assets exceeded the planned level by 0.16 points. This was directly influenced by two factors:

• above-plan increase in net profit in the amount of 124 thousand rubles. increased the level of return on assets by: 124 / 21620 * 100% = + 0.57 points;
• an above-plan increase in the enterprise's assets in the amount of 993 thousand rubles. decreased the level of return on assets by: + 0.16 - (+ 0.57) = - 0.41 points.

The total influence of two factors (balance of factors) is: +0.57+(-0.41) =+0.16.

So, the increase in the level of return on assets compared to the plan took place solely due to an increase in the amount of net profit of the enterprise. At the same time, the increase in average cost, others, also reduced the level return on assets.

For analytical purposes, in addition to indicators of profitability of the entire set of assets, indicators of profitability of fixed assets (funds) and profitability of working capital (assets) are also determined.

Let us present the profitability indicator of fixed production assets (otherwise called the capital profitability indicator) in the form of the following formula:

The profit remaining at the disposal of the enterprise multiplied by 100% and divided by the average cost of fixed assets.

Profit remaining at the disposal of the enterprise multiplied by 100% and divided by the average value of current assets.

Return on Investment

The return on invested capital (return on investment) indicator expresses the efficiency of using funds invested in the development of a given organization. Return on investment is expressed by the following formula:

Profit (before income tax) 100% divided by the currency (total) of the balance sheet minus the amount of short-term liabilities (total of the fifth section of the liabilities side of the balance sheet).

Return on equity

In order to obtain an increase through the use of a loan, it is necessary that the return on assets minus interest on the use of a loan is greater than zero. In this situation, the economic effect obtained as a result of using the loan will exceed the costs of attracting borrowed sources of funds, that is, interest on the loan.

There is also such a thing as financial leverage, which is the specific weight (share) of borrowed sources of funds in the total amount of financial sources for the formation of the organization’s property.

The ratio of the sources of formation of the organization's assets will be optimal if it provides the maximum increase in return on equity capital in combination with an acceptable amount of financial risk.

In some cases, it is advisable for an enterprise to obtain loans even in conditions where there is a sufficient amount of equity capital, since the return on equity increases due to the fact that the effect of investing additional funds can be significantly higher than the interest rate for using a loan.

The creditors of this enterprise, as well as its owners (shareholders), expect to receive certain amounts of income from the provision of funds to this enterprise. From the point of view of creditors, the profitability (price) indicator of borrowed funds will be expressed by the following formula:

The fee for using borrowed funds (this is the profit for lenders) multiplied by 100% divided by the amount of long-term and short-term borrowed funds.

Return on total capital investment

A general indicator expressing the efficiency of using the total amount of capital available to the enterprise is return on total capital investment.

This indicator can be determined by the formula:

Expenses associated with attracting borrowed funds plus profit remaining at the disposal of the enterprise multiplied by 100% divided by the amount of total capital used (balance sheet currency).

Product profitability

Product profitability (profitability of production activities) can be expressed by the formula:

The profit remaining at the disposal of the enterprise multiplied by 100% divided by the total cost of products sold.

The numerator of this formula can also use the profit indicator from sales of products. This formula shows how much profit an enterprise has from each ruble spent on the production and sale of products. This profitability indicator can be determined both for the organization as a whole and for its individual divisions, as well as for individual types of products.

In some cases, product profitability can be calculated as the ratio of the profit remaining at the disposal of the enterprise (profit from product sales) to the amount of revenue from product sales.

• from changes in the structure of sold products. An increase in the share of more profitable types of products in the total amount of production helps to increase the level of profitability of products.;
• changes in product costs have an inverse effect on the level of product profitability;
• change in the average level of selling prices. This factor has a direct impact on the level of profitability of products.

Return on sales

One of the most common profitability indicators is return on sales. This indicator is determined by the following formula:

Profit from sales of products (works, services) multiplied by 100% divided by revenue from sales of products (works, services).

Return on sales characterizes the share of profit in revenue from product sales. This indicator is also called the rate of profitability.

If the profitability of sales tends to decrease, then this indicates a decrease in the competitiveness of the product in the market, as it indicates a reduction in demand for the product.

Let's consider the procedure for factor analysis of the return on sales indicator. Assuming that the product structure remains unchanged, we will determine the impact on the profitability of sales of two factors:

• changes in product prices;
• change in product costs.

Let us denote the profitability of sales of the base and reporting period, respectively, as and .

Then we obtain the following formulas expressing the profitability of sales:

Having presented profit as the difference between revenue from sales of products and its cost, we obtained the same formulas in a transformed form:

Legend:

∆K— change (increment) in profitability of sales for the analyzed period.

Using the method (method) of chain substitutions, we will determine in a generalized form the influence of the first factor - changes in product prices - on the return on sales indicator.

Then we will calculate the impact on the profitability of sales of the second factor - changes in product costs.

Where ∆K N— change in profitability due to changes in product prices;

∆K S— change in profitability due to changes in . The total influence of two factors (balance of factors) is equal to the change in profitability compared to its base value:

∆К = ∆К N + ∆К S,

So, increasing the profitability of sales is achieved by increasing prices for products sold, as well as reducing the cost of products sold. If the share of more profitable types of products in the structure of products sold increases, then this circumstance also increases the level of profitability of sales.

In order to increase the level of profitability of sales, the organization must focus on changes in market conditions, monitor changes in product prices, constantly monitor the level of costs for production and sales of products, as well as implement a flexible and reasonable assortment policy in the field of production and sales of products.

Calculating indicators for basic financial analysis will help an organization of any scale of activity analyze the efficiency of using existing resources and property.

Analysis methods

You can analyze the indicators:

• based on the balance sheet and on the basis of the financial results statement (OFR);
• vertically of reports, determining the structure of financial indicators and identifying the nature of the influence of each reporting line on the result as a whole;
• horizontally, by comparing each reporting item with the previous period and establishing dynamics;
• using coefficients.

Let's take a closer look at the last method of analysis. Let's look at the return on assets ratio and how to calculate it.

Return on assets characterizes the efficiency of using the organization's property and the sources of its formation. This concept is identified with the concepts of efficiency, profitability, profitability of the organization as a whole or business activity. It can be calculated in several ways.

Methods for calculating profitability

Return on total assets shows how many kopecks of profit each ruble invested in its property (current and non-current funds) brings to the organization, ROA. The return on assets (formula) is calculated from the balance sheet and the financial structure as follows:

Page 2300 OFR “Profit, loss before tax” / line 1600 of the balance sheet × 100%.

Net return on assets is calculated as follows:

Page 2400 OFR “Net profit (uncovered loss)” / line 1600 of the balance sheet × 100%.

Profitability of sources of formation of the organization’s property:

Page 2300 OFR “Profit, loss before tax” / Result of section III of the balance sheet × 100%.

As a characteristic, economic return on assets shows the efficiency of an organization. Normal coefficient values ​​should be in the range greater than 0. If the calculated coefficients are 0 or negative, then the company is operating at a loss, and measures must be taken to ensure its financial recovery.

Return on investment (RONA) shows how much profit the company receives for each unit invested in the company's activities. The calculation is made based on two indicators:

• line 2400 OFR “Net profit (uncovered loss)”;
• NA on balance (line 1600 - line 1400 - line 1500).

Calculation examples

Judging by the reporting of RAZIMUS LLC, profitability:

• total assets is equal to 8964 / 56,544 × 100% = 15.85%;
• net assets is 7143 / 56,544 × 100% = 12.33%;
• sources of property formation - 8964 / 25,280 × 100% = 35.46%;
• The NA will be equal to 7143 / (56,544 - 11,991 - 19,273) × 100% = 28.25%.

In addition to characterizing the financial position of the company and the effectiveness of its investments, profitability affects the interest in your company from the tax authorities. Thus, a low indicator may serve as a reason for including the company in the on-site inspection plan (clause 11, section 4 of the GNP Planning Concept). For the tax authorities, the indicator will be low if it is 10% or more less than the similar indicator for the industry or for the type of activity of the company. This will be the reason for checking.

Thus, having calculated the profitability, you can independently assess whether you are subject to an on-site inspection or not. Industry average values ​​of indicators change annually and are posted on the website of the Federal Tax Service of Russia until May 5.

What dictionary doesn’t dream of being explanatory, what paper doesn’t want to be valuable, and what business doesn’t want to become profitable! But not only business. Its constituent parts - the assets - are also desperately striving for this. In fact, the indicator of their profitability is a summary characteristic that demonstrates not only the practical value of the resource, but also the manager’s ability to manage it. No wonder they say: “In skillful hands, even a board is a balalaika.”

Of course, a lot depends on the chosen field of activity and the environment. Here, the larger the asset, the lower its profitability indicator. Capital intensity, as a rule, is characteristic of those industries whose elasticity of demand for goods is close to zero. Those. The entrepreneur pays for guaranteed sales with a reduced rate of profitability. Vital examples: hydrocarbon production, nuclear energy, or even companies that lay Internet cables on the ocean floor and operate them.

But this is all philosophy in general terms. As for the specifics, calculating the profitability of business components is one of the tools for obtaining management signals for the company's management. This is not always an easy task in terms of labor intensity (accounting will always object), and you may not like the results. But the principle applies here: “Warned in time means saved.”

Formula and meaning of return on assets based on net profit

The formula for the return on assets ratio (KRA in Russian practice and ROA in global practice) is very laconic:

KRA = Net profit / Total value of all assets(in this case, amounts servicing current loans do not take part in the calculation)

If we multiply the value of KRA by 100%, then we get the value of return on assets as a percentage (as you like).

As follows from the formula and from the logic of the name, this indicator reflects the degree of efficiency in the use of assets by the management of the enterprise in the implementation of business processes. The extent to which management utilizes all capabilities to ensure maximum profitability.

If we take into account that in the balance sheet the asset corresponds to the amount of liabilities, this means that it is in this case (this is important) that the formula is acceptable:

KRA = Net profit / (Equity + Borrowed funds)

Thus, the return on total capital is actually analyzed. In this formula, the sum of equity and borrowed funds is in the denominator of the fraction. This means that the higher the volume of accounts payable, the lower the resulting return on assets will be. From a logical point of view, this is fair. After all, in order to provide a business with a certain profitability, there is insufficient capital available, but it is necessary to borrow, this means that the profitability of these very own assets leaves much to be desired.

It is curious that even if the volume of equity is equal to zero, the return on assets indicator will still not lose its meaning. After all, the denominator of the fraction will be different from zero. The situation clearly demonstrates that the return on assets ratio is not just a characteristic of the financial return on investment. Business here is considered as a system and KRA helps analyze the ability of this business to generate profit. The system refers to certain scarce connections, the management abilities of the company’s management, and how managers use the favorable opportunities provided.

It should be understood that return on own assets is a qualitative individual characteristic inherent in each business. In this case, the scale of the enterprise is absolutely not taken into account. A business can be a family company - a convenience store, and at the same time have a KRA value close to 1. And there are examples of transnational oil corporations that are managed very poorly, with a coefficient value below 0.01.

There are popular options for calculating return on assets using EBITDA instead of net profit. EBITDA is earnings before taxes and interest on loans. Naturally, it is higher than the net profit on the balance sheet. This means that the return on assets will also be higher. Correctly, this resembles a kind of “fraud,” a kind of attempt to mislead analysts interested in identifying the true state of affairs in the company (potential creditors or even tax authorities). It is not without reason that in global practice EBITDA is excluded from the official characteristics of the financial condition of an enterprise.

The return on assets ratio is close in meaning to assessing the profitability of the enterprise as a whole. In this regard, it is recommended to use accounting data by year. This is advisable so that the comparison of return on assets and profitability of the enterprise is correct or comparable. After all, profitability is measured in percentage per annum.

The natural desire of any entrepreneur is to maximize the return on assets of his company. To do this you need:

1. increase sales margin (profit can be increased either by increasing the selling price or by reducing production costs);
2. increase the rate of asset turnover (in order to collect more profit in a certain period of time).

Non-current assets are the property of the enterprise, which is reflected in the very first part of Form 1 of the balance sheet. This type of property is the most capital-intensive. Therefore, it transfers its price to the cost of finished products in parts called depreciation.

According to accounting standards, non-current assets consist of:

• fixed assets (buildings/structures, long-term equipment/tools, communication facilities, vehicles, etc.);
• long-term financial investments (investments, long-term (more than a calendar year) accounts receivable, etc.);
• intangible assets (patents, exclusive licenses, trademarks, franchises and even business reputation).

The coefficient formula in this case is as follows:

KRVneobA = Net profit / Cost of non-current assets (x 100%)

Interpretation of the indicator is very difficult. In fact, the value is the profitability that the presence of these assets (fixed assets) can potentially provide you with the current quality of their management. For entrepreneurs who are already working in this industry, this value may not bring significant analytical meaning. However, for those who are just about to enter the market, the profitability of non-current assets is a key indicator influencing their decision.

It is worth remembering that the return on non-working capital is a conditional indicator. Those. it demonstrates how much you can earn from this equipment, provided that it is properly maintained and managed correctly.

Current assets are the exact opposite of non-current assets. Their useful life is less than a year and their cost is significantly lower. Current assets include all components of cost. At the same time, their price is taken into account in full (and not in parts, as is the case with fixed assets).

Structure of current assets (in descending order of liquidity):

1. cash;
2. accounts receivable;
3. VAT refundable (on purchased inventory items);
4. short-term financial investments;
5. inventories and work in progress;

Formula for the corresponding coefficient (RCA in international terminology):

KROBA = Net profit / Cost of current assets (x 100%)

The significance of the resulting indicator of profitability of current assets is higher, the fewer fixed assets the company has. Companies operating in the service sector have the closest approximation, and in those areas where there is no need to seriously invest in equipment. Organizations engaged in foreign trade, as well as leasing companies (due to the high amount of VAT refundable) have a reduced coefficient value. In addition, credit financial institutions do not have a high return on assets ratio due to the significant volume of receivables.

The profitability ratios of current (1) and non-current (2) assets should not be considered separately. They acquire much greater information content in the case of joint analysis. The predominance of one value over the other indicates the greater importance of 1 or 2 types of capital in generating company profits. The absolute value in this case plays a much smaller role for the analyst. And of course, when performing an analysis, it always makes sense to keep the return on total assets value at hand. The total coefficient is the profitability of the business, and whose contribution is greater (turnover or fixed assets) shows the prevalence of the corresponding coefficients.

Return on assets on balance sheet

It seems advisable to also calculate the return on assets on the balance sheet. In the denominator of the formula we indicate the balance sheet currency. In addition, we reduce this value by the amount of debt of the founders for contributions to the authorized capital of the organization. The numerator of the fraction still indicates the net profit on the balance sheet (after paying all taxes).

KRAp/b = Net profit / (Balance sheet currency - Accounts payable of founders) (x 100%)

Profitability on the balance sheet characterizes, first of all, the process of reproducing the company's profit. Starting conditions are not taken into account. They mean the authorized capital, as well as the obligations of shareholders (or shareholders) to repurchase it. However, the company's own funds are represented not only by the authorized capital. A significant share of them is accumulated retained earnings. And it just falls into the calculation of return on assets on the balance sheet. This is the key difference in the meaning of this indicator: it does not take into account the initial reserve (UC), but takes into account the results of past production achievements (meaning accumulated profit).

If the return on assets ratio characterizes the assets themselves in terms of their contribution to the overall pot of profit, then the profitability on the balance sheet “assesses” the entire business process as a whole, removing the value of the initial capital. However, it is recommended to consider these two indicators together.

Return on net assets

Net assets are the “property reality” of the firm. The law requires that they be calculated annually. The amount of net assets is calculated as the difference between their value reflected in Form 1 of the balance sheet and the amount:

1. short-term accounts payable;
2. long-term accounts payable;
3. reserves and deferred income.

In fact, net assets can be called the result of the company's activities, including the results of previous ups and downs.

If the value of net assets becomes less than the amount of the authorized capital, this means that the company begins to “eat up” the initial contribution of the founders. If net assets go negative, it means that the enterprise is not able to pay off its debt obligations without outside help. There is a so-called insufficiency of property.

KRCHA = Net profit / Revenue (x 100%)

The return on net assets indicator can be correctly interpreted as the rate of profit for each monetary unit of products sold. And it, of course, directly correlates with the profitability of the enterprise as a whole.

Despite the fact that the value of net assets itself is calculated at the end of the year, their profitability ratio can and should be kept, as they say, on the desktop. This indicator can warn against a catastrophic drop in sales efficiency.

Depending on the field of activity of companies, they have individual values ​​​​of profitability and return on assets. These are, for example, the values ​​of KRA for the following types of activities:

1. Manufacturing sector - up to 20%
2. Trade - from 15% to 35%
3. Service sector - from 45% to 100%
4. Financial sector - up to 10%.

Organizations operating in the service sector have an increased return on their capital due to the relatively low size of fixed assets. In addition, services cannot be stored, so the size of current (current) assets is also small.

Next come trade organizations. Their non-current assets are also, as a rule, small, but warehouse inventories push the turnover of such enterprises to increase. However, their growth is compensated by an increased (relative to other areas) turnover rate. After all, the business of such a company depends on it.

A fairly clear picture emerges with regard to industrial production. The most expensive (among all areas of activity) fixed assets drag down the entire family of profitability indicators.

The situation with credit and financial companies is much more interesting. In an industrial environment, there are not many competitors - they all must have adequate capital (and a significant part must be in kind), and their number is limited. In the service sector there are those who know how to provide them (a serious limitation), in trade - those who were able to establish connections and get discounts. But the financial sector attracts all those who have not found themselves in other areas. Reduced entry thresholds into the industry contribute to an eternal boom, regardless of whether there is current macroeconomic growth or a crisis. Actually, it is the huge number of market participants that reduces to a minimum the overall level of profitability both for individual transactions and for the capital involved as a whole.

Material from the site

What is return on assets of an enterprise

Return on assets(Return on Assets, ROA) is a relative indicator of the efficiency of an enterprise, used in the analysis of financial statements to assess the profitability and profitability of the organization.
Return on assets is a financial ratio that characterizes the return on the use of all assets of the organization, the efficiency of use of property, allowing one to evaluate the quality of work of financial managers. That is, it shows how much net profit per monetary unit is brought by each unit of assets available to the company. In other words: how much profit is generated for each monetary unit invested in the organization’s property.
The profitability ratio is of interest to: investors, lenders, managers and suppliers. Using the ROA ratio, you can analyze an organization's ability to generate profits without taking into account its capital structure. Return on Assets is associated with such categories as the financial reliability of the enterprise, solvency, creditworthiness, investment attractiveness, competitiveness.

How is ROA ratio calculated?

Return on assets is defined as the quotient of net profit (or losses) received for the period divided by the total assets of the organization for the period.
ROA = ((net profit + interest payments) * (1 – tax rate)) / enterprise assets * 100%.
As can be seen from the formula, the entire profit of the enterprise before payment of interest on the loan is displayed. And then the amount of deducted interest including tax is added to the amount of net profit. Payments for the use of borrowed funds are considered gross costs, and the income of investors is paid from profits after deducting all interest payments.
Such calculation features are due to the fact that when forming assets, two financial sources are used - own funds and borrowed funds. Consequently, when forming assets, it makes no difference which ruble came as part of borrowed funds and which was contributed by the owner of the enterprise. The essence of the profitability indicator is to understand how effectively each unit of raised funds was used. For this reason, it is necessary to exclude from net profit the amount of interest payments paid before income tax.