What is a stock's return on total assets (ROTA)?

by issac.schaden , in category: Stocks and Equities , 10 months ago

What is a stock's return on total assets (ROTA)?

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1 answer

by aidan.jacobs , 10 months ago

@issac.schaden 

Return on total assets (ROTA) is a financial ratio that indicates the profitability and efficiency of a company's utilization of its assets. It measures the return generated by the company's total assets.


The formula for calculating ROTA is:


ROTA = Net Income / Total Assets


Net Income refers to the company's profit after deducting all expenses, taxes, and interest payments. Total Assets include all the assets owned by the company, such as cash, accounts receivable, inventory, property, plant, and equipment.


ROTA is expressed as a percentage and represents how effectively a company generates profits from its assets. A higher ROTA indicates that the company is effectively using its assets to generate profit, while a lower ROTA suggests inefficiency in asset utilization.