The Return on net assets is a measure of the financial performance of the company that relates earnings to the company’s assets that generate earnings; fixed assets such as equipment and property, and working capital. The higher the ratio, the better the company is at efficiently using its assets.
Return on net assets is a valuable number both on its own and compared to other companies. Ideally, you would invest in companies with the highest Return on net assets.
Formula for Return on net assets
\[Return\,on\,investment = \frac{{Net\,income}}{{Fixed\,assests+Working\,capital}}*100\]
Example
Pidilite industries has net income in the amount of Rs9,475 and fixed assets plus working capital in the amount of Rs.73,885. This gives a RONA of 12.83%. This means that for every Rs100 of investment in net assets the company generates Rs12.83 of net income.
