This glossary uses Visual Finance™ to bring financial terms to life. Each example shows data from the Round Number Company, a fictional business with simplified figures to make learning easier. For more details, visit 'How to Read Visual Finance'.
Return on Assets (RONA) shows the profit that managers are making as a percentage of the assets given them to manage.
Return on Net Assets Ratio calculation: Operating Income as a percentage of Net Assets
where Net Assets = Total Assets less (Payables and Other Current Liabilities)
Example: The Round Number CompanyOperating Income = 48; Total Assets = 300; Payables = 20, Other Current Liabilities = 8 Return on Net Assets = 48/(300 - 20 - 8) = 48/272 = 18% |
Companies using Return on Net Assets (RONA) rather than Return on Assets (ROA) are likely to use Net Asset Turnover rather than Asset Turnover.
“What do you mean by that?”
There are multiple definitions for ‘Net Assets’. Check which definition is being used. See discussion at Net Assets.
Also known as Return On Capital Employed (ROCE).
See also Return On Assets (ROA).
The above is our generic explanations of common corporate financial terminology. Actual meanings can vary widely from company to company; in order to have the correct internal definition you need to ask your Finance Department, "What do you mean by that?"