What is a return on net assets: What is a return on net assets (RONA)
Return on Net Assets (RONA) – Return on Net Assets (RONA) is a measure of financial performance divided by the share of assets and working capital determined by net profit. Net profit is also called net income. The RONA ratio reflects how well the company and its management are managing their assets in a financially viable way, while the high ratio shows that management is generating more revenue for every dollar invested in assets. RONA is used to evaluate how well a company is performing compared to other companies in the industry.
Return on Net Assets (RONA) compares a company’s net profit with its net assets so that it shows how well a company uses its assets for income.
A higher RONA indicates that management is making optimal use of the company’s assets.
Net income and fixed assets can be adjusted for unusual or non-recurring objects to get a normalized ratio result.
How to calculate RNA
Rona has three components – net income, fixed assets and net working capital. Net income is found on the income statement and is calculated as revenue after deducting operating expenses such as expenses related to the formation or sale of the company, management salaries and utilities, interest expenses related to the loan and all other expenses. Fixed assets are tangible assets used in products such as real estate and machinery and do not include goodwill or other intangible assets in the balance sheet. Net working capital is calculated by deducting current liabilities from the company’s current assets. It is important to note that long-term liabilities are not part of working capital, and vegetables are not deducted when calculating working capital for a net asset ratio return.
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