The Income|Outcome^® Contextuary

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 Company Operating Income = 48; Total Assets = 300; Payables = 20, Other Current Liabilities = 8 Return on Net Assets = 48/(300 - 20 - 8) = 48/272 = 18%

• RONA uses the Assets derived from Equity and Long-term Liabilities; it does not include supplier Payables and other current liabilities which the managers have generated themselves.
• Similarly, Operating Income does not take into account the finance charges and taxes; i.e. the items that managers have no control over.

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).