Question

What does the "return on total assets" (also called the "return on investment") measure? How is it expressed as a formula?

Answer 1

The return on total assets (ROTA), or return on investment (ROI), measures the profitability of a company's assets. It is expressed as a percentage and is calculated by dividing net income by total assets.

Step-by-step explanation:

The return on total assets (ROTA), also known as the return on investment (ROI), is a financial metric that measures the profitability of a company's assets. It indicates how effectively a company is using its assets to generate profits. ROTA is expressed as a percentage and is calculated by dividing the company's net income by its total assets.

ROTA = (Net Income / Total Assets) x 100%

For example, if a company has a net income of $500,000 and total assets worth $5,000,000, the ROTA would be:

(500,000 / 5,000,000) x 100% = 10%