The return on assets ratio, or return on total assets ratio, relates a company’s after tax net income during a specific year, to the company’s average total assets during the same year.

Let’s assume that a company had $60,000 of net income after tax during the year 2007. During the same 12 month period its total assets averaged $1,000,000. Its return on assets ratio for 2007 was 6% ($60,000 divided by $1,000,000).

You would compare this company’s return on assets to other companies in the same industry.

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About the Author: Harold Averkamp (CPA) has worked as an accountant, consultant, and university accounting instructor for more than 25 years.

He is the creator of the AccountingCoach Pro which has been praised for its ability to simplify accounting in a way that anybody can understand.

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