Return on net assets : Meaning, Formula and Example

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The Return on net assets is a measure of the financial performance of the company that relates earnings to the company’s assets that generate earnings; fixed assets such as equipment and property, and working capital. The higher the ratio, the better the company is at efficiently using its assets.

Return on net assets is a valuable number both on its own and compared to other companies. Ideally, you would invest in companies with the highest Return on net assets.

Formula for Return on net assets

\[Return\,on\,investment = \frac{{Net\,income}}{{Fixed\,assests+Working\,capital}}*100\]

Example

Pidilite industries has net income in the amount of Rs9,475 and fixed assets plus working capital in the amount of Rs.73,885. This gives a RONA of 12.83%. This means that for every Rs100 of investment in net assets the company generates Rs12.83 of net income.