RETURN ON TOTAL ASSETS (ROTA)

Advertisement

Return on total assets provides the foundation necessary for a company to deliver a good return on equity. A company without a good ROTA finds it almost impossible to generate a satisfactory ROE.

ROTA  =    PBIT                    x     100

Total Assets

PBIT is the amount remaining when total operating cost is deducted from total revenue, but before either interest or tax have been paid. Total operating cost direct factory cost, plus administration, selling and distribution overheads.

This operating profit figure is set against the total assets figure in the balance sheet. The percentage relationship between the two values gives the rate of return being earned by the total assets. Therefore this ratio measures how well management uses all the assets in the business to generate an operating surplus.

Return on total assets uses the three main operating variables of the business.

  • Total revenue
  • Total cost
  • Assets employed

It is therefore the most comprehensive measure of total management performance.

Advertisement
The following two tabs change content below.
We, at BMS.co.in, believe in sharing knowledge and giving quality information to our BMS students. We are here to provide and update you with every details required by you BMSites! If you want to join us, please mail to [email protected]
10 Comments

Leave a reply

BMS.co.in is aimed at revolutionising Bachelors in Management Studies education, also known as BMS for students appearing for BMS exams across all states of India. We provide free study material, 100s of tutorials with worked examples, past papers, tips, tricks for BMS exams, we are creating a digital learning library.

Disclaimer: We are not affiliated with any university or government body in anyway.

©2020 BMS - Bachelor of Management Studies Community 

A Management Paradise Venture

Ask Us On WhatsApp
or

Log in with your credentials

or    

Forgot your details?

or

Create Account