Define: Return On Net Assets

UK Accounting Glossary

Definition: Return On Net Assets



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Full Definition of Return On Net Assets


Return On Net Assets (RONA) is a comparison of net income versus net assets. This metric of company financial performance takes into account earnings with regard to fixed assets and net working capital.

The Return On Net Assets (RONA) is calculated by dividing the company’s net income by the sum of its fixed assets and net working capital.

Net income, or profit after tax, can be found on the income statement. Fixed assets, including property, plant and equipment, long term investments, and other non-current assets, can be found on the balance sheet. Net working capital is defined as current assets minus current liabilities.

There are no fixed standards or benchmarks for Return On Net Assets, however, the higher this ratio is the better. Higher RONA means that the company is using its assets and working capital efficiently and effectively. An increasing RONA is an indicator of improving profitability and improving financial performance.

Return On Net Assets should usually be used in capital-intensive industries where major purchases are for fixed assets. It should be used in subsequent years to see how effective the investment in new fixed assets has been.


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Synonyms For Return On Net Assets


RONA


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Definition Sources


Definitions for Return On Net Assets are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 22nd March 2020.